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UNITED STATES BUREAU OF EDUCATION. 



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PRESENTED BY 



jy 



THE 

Distribution of Products 



THE MECHANISM AND THE METAPHYSICS 
OF EXCHANGE 

three essays 

What Makes the Rate of Wages? 

What is a Bank? 

The Railway, the Farmer, and the Public 

O 



N^ 







EDWARD ATKINSON 





SECOND EDITION 








NEW YORK & LONDON 


G. 


P. PUTNAM'S SONS 




%\t ^niihtrbotker ^rtss 




1885 



v^^^--^ 



COPYRIGHT BY 

EDWARD ATKINSON 

i3S5 



Press of 

G. P. Putnam's Sons 

New York 



GENERAL PREFACE. 



It may happen that one whose life from very early years has 
been of necessity mainly devoted to active business and to prac- 
tical affairs, will be found as well qualified to treat the mo- 
mentous questions which are the subjects of the following essays 
as students or practised writers whose pursuits are far removed 
from the actual Avork of providing for the material wants of men. 
But if this do not prove to be the case, yet the business man 
who puts the results of his observations into a simple form, easy 
of comprehension, may yet aid those who are more competent than 
himself in evolving a knowledge of the higher laws upon which 
the very existence of society depends. 

A true commercial and ecanortiic history of nations, or even of 
the English-speaking people, remains to be written. " How did 
these people get their living ? " is'the question which every practi- 
cal man asks when reading about the struggles of dynasties, the 
narrative of wars and battles^ and the records of debates of legis- 
lative bodies, which constitute the chief material of history. Even 
when he reads such history with intelligent comprehension, he can- 
not fail to observe that no matter how each great struggle has be- 
gun, whether incited by religious enthusiasm, by personal ambi- 
tioUt or by the uprising of an oppressed people, in the end it has 
almost always been the commissariat that has controlled events. 
Power has fallen not so much to the strongest battalions and to 
the heaviest guns, as to those who could sustain the battalions 
longest, and support them with bread and meat as well as with 
powder and iron. 

On the other hand, one who reads even the history of our own 
country from the commercial standpoint may well believe that 



IV GENERAL PREFACE, 

had Adam Smith's " Wealth of Nations " been written fifty years 
earHer, it might have exercised as profound an effect on the com- 
mercial policy of England during the fifty years preceding 1776 
as it did in the fifty years subsequent to that date, in which case 
the colonies of America might have separated from the mother 
country by peaceful methods, and the War of the Revolution might 
have been spared. 

Only the present can be called a specifically commercial cen- 
tury, and one of its phases has been the abuse of the power of 
credit. Only in a commercial era could national debts have been 
incurred in the way they have been during the last fifty years, and 
now these debts threaten the very existence of the nations which 
are burthened by them. Since the beginning of the present 
century, the public debt of Europe has risen from $2,600,000,000 
to over $22,000,000,000. This debt has been accompanied in 
many States by the issue of paper substitutes for money, which 
have depreciated, and either by that method, or in some more 
summary way, the repudiation of a large part of it may become 
a necessity before the end of the century. 

There are two kinds of national debt. One consists of debts 
imposed upon the property and products of the people by a dy- 
nasty, or by a privileged class of legislators, without the consent 
of the governed, and generally for the prosecution of wars by 
which the people were oppressed rather than made free. So long 
as such a debt exists it works a false distribution of wealth and 
of product, and it has even been said by one of the greatest living 
statesmen of England, that her " national debt is the chief cause 
of her pauperism." 

The other kind of national debt is one incurred by the consent 
of the governed for the purpose of establishing personal liberty 
and equal rights. Such is our debt. It will all, or nearly all, be 
paid within one generation from the date when it was incurred, 
or at least within the present century ; and it will have fallen to a 
democratic nation, founded upon manhood suffrage, to be the first 
among nations to redeem a substitute for money, put into use as 



GENERAL PREFACE. V 

money under an act of legal tender for the purpose of collecting 
a forced loan, in the true coined money named in the promise. 
We shall also be the first to pay our debt without discount or de- 
preciation. When our faith in democracy fails us, let us think of 
this and again take courage. 

But if I can add nothing to the science of history by putting 
these practical treatises within the reach of students, I may yet 
offer them to my business friends and associates with the assur- 
ance that even if they may serve no other purpose, such studies 
lighten the necessary drudgery of our daily life, lend a phase of 
imagination to our work, bring friends and sympathy among men 
of science and literature, and render life far better worth living 
than it would be if it could only be measured by the mere dollars 
which we earn. 

To the Directors of the Corporations with which I am now con- 
nected and by whom my own daily work is supervised and aided, 
I dedicate this volume, in testimony of the cordial friendship by 
which business men may become united, even when differing 
widely in their views upon great questions of public policy. 

EDWARD ATKINSON. 
Brookline, Oct. 4, 1884. 



WHAT MAKES THE RATE OF 
WAGES ? 

A TREATISE PREPARED BY 

EDWARD ATKINSON 

Of Boston, Mass., U. S. A. 

AND SUBMITTED AT THE MEETING OF THE BRITISH ASSOCIATION FOR THE 

ADVANCEMENT OF SCIENCE, HELD IN MONTREAL, CANADA, AUGUST 

28, 1884 ; ALSO PRESENTED BY TITLE AT THE MEETING OF 

THE AMERICAN SOCIAL SCIENCE ASSOCIATION, HELD 

IN SARATOGA, SEPTEMBER, 1884 



"In proportion to the increase of capital the absolute share (of a given 
product) falling to capital is augmented, but the relative share is diminished ; 
on the other hand, the share falling to labor is increased, both absolutely and 
relatively. " — Bastiat. 



PREFACE. 



The only time which the writer could devote to the dic- 
tation of this treatise and to the computations which have 
been necessary in its preparation, has been in the short inter- 
vals of active business, and in the few evenings which could 
be spared after the duties of the day were over. 

The treatise therefore takes a somewhat unsuitable form, 
consisting of introduction, the treatise proper, notes and ex- 
planations which have been added, and the various appen- 
dices sustaining the main argument, — many of which ad- 
denda are entitled to more consideration in the United 
States than they would have on the part of the British 
Association for the Advancement of Science, before whom 
the treatise proper was first read. 

If time sufficed, all these detached portions might well 
be re-written and condensed in the treatise itself. But this 
is impossible. I submit the essay with the hope that it 
will give a direction to a thorough and complete official 
investigation, if the method is found to be a suitable one ; 
or to a continuation of the study on the part of competent 
economists who have more time than I have to devote to 
such work, rather than with any expectation of its being 
accepted as final and conclusive. 

All persons with whom I have conferred agree upon the 
paramount importance of the main question presented. 

All men who have studied the phenomena of wages are 
somewhat appalled by the indications of the contest which 



2 , PREFACE. 

seems to be approaching in every civilized state. This 
struggle takes the aspect in one place of a contest between 
the landlord and tenant ; in another between landowner and 
peasant ; in another between mill-owner and operative ; in 
another between privileged class and proletariat ; in another 
between rich and poor ; and in another between the needy 
and the well-to-do, whether the latter be rich or only well- 
off. 

These are all different phases of the same question ; all 
rest for their conclusion upon the simple problem : " What 
Makes the Rate of Wages ? " 

Entirely subordinate to these great divisions between 
classes may be found the minor questions of State inter- 
ference with the hours of labor ; State regulation of the 
railway service ; protection and free trade ; usury laws ; the 
employment of women in factories ; and other labor ques- 
tions so-called. In this treatise I have avoided, as far as 
possible, any reference to these minor questions in order 
to keep its main purpose distinct and separate. 

I trust that an attempt to present, if not to determine, a 
fundamental principle underlying all these various questions 
will be as welcome to the advocate of protection as it may 
be to the advocate of free trade ; as welcome to the believer 
in cooperation, as it may be to one who trusts in competi- 
tion ; as welcome to the person to whom the wrongs of the 
poor seem most urgent, as it may be to the man of wealth 
who considers his property a trust — involving duties as well 
as rights. 

Edw^ard Atkinson. 

Brookline, Mass., U. S. A., 
September i8, 1884. 



INTRODUCTION. 



The purpose of the following treatise is to consider the 
forces to which both employer and employed are subjected 
in determining what rates of wages can be paid in money 
and which control the bargains made between them. 

It is not denied that an employer who is in the possession 
of large capital may agree to pay a certain rate of wages for 
a time, irrespective of any other conditions than his own will. 
But his power to do so will be limited by the amount of 
capital previously earned which he is willing to spend in 
anticipation of being able to recover the sums which he may 
agree to pay from the sale or use of the product upon which 
the work is done. Sooner or later the rate of wages is de- 
termined by conditions over which neither the employer nor 
the employed have any control. It is these forces which 
will be considered. 

The purpose of this treatise is to determine the rate of 
wages expressed in terms of money. The distinction must 
be made between absolute wages and money wages. Abso- 
lute wages consist of the food, fuel, shelter, and savings if 
any, which are the true incentive to work. Money is merely 
the instrument wherewith absolute wages are obtained. 
Money serves to measure the work done, provided it be 
true money. If it be "mock money," as inconvertible 
paper money has been rightly called, it will serve to meas- 
ure the work done, and in addition thereto the loss suffered 
by the workman, who Is subject to the risk of the fluetua- 

3 



4 INTRODUCTION, 

tion in the purchasing power of the rate of his wages, which 
always ensues when inconvertible paper or mock money is 
forced into use in place of true money. 

Before any intelligent consideration can be given to the 
determination of what makes the rate of wages, an absolute 
definition needs to be given to the word money. One of the 
great benefits which ensues from the study of economic 
questions is this necessity for the careful choice of words, 
for accurate definition, and for precision in the use of lan- 
guage as an instrument of thought or for the naming of 
things. 

The Supreme Court of the United States has lately lent 
itself to the dangerous and fraudulent theory oi fiat money. 
The Justices, save only one, have found in the sections of 
the Constitution which give Congress power to pass laws to 
enable the Executive " to coin money," or " to borrow 
money," reasons for yielding to Congress the power to coin 
paper and to make it lawful money. This decision is greatly 
to be regretted. It is replete with danger, and may yet 
cause much disaster to the people of the United States. 
Upon such a question as this, which is something more than 
a mere question of statute law, students and business men 
may rightly express an opinion, even if it is contrary to the 
dictum of the Court. 

Great judges make precedents, and do not blindly follow 
them without consideration of the fundamental principles 
which must underlie all statutes, if justice is to be done by 
legal methods. When Mansfield declared that no slave could 
tread the soil of England, all precedents were against his 
decision. When Parsons ruled that none but free men 
could breathe the air of Massachusetts, he created a prece- 
dent, but he did not search for one. When Camden ruled 
that " general warrants " were inconsistent with English 



INTRODUCTION. \ 5 

liberty, he went against the precedents of the courts for 
generations before. Yet, in making these decisions, these 
great judges brought the law of the land to the high level 
of the principle of human freedom, without regard to prece- 
dent. What had not been law until they so decided, be- 
came the accepted principle of law which no mere statute 
could afterward contravene. Had our Supreme Court but 
sought to give a true definition to the word money, they 
might have ruled that neither under the provisions of the 
Constitution for coining money nor for borrowing money 
could Congress or Court find authority for coining paper 
into money ; or, in other words, for attempting to make 
something out of nothing. Had they given any considera- 
tion to the question. What is money ? they would not have 
rendered a decision which, economically considered, is ab- 
surd, and by which they have substantially declared that the 
promise of a thing is the thing itself. Under this decision 
the people in this country have no rights which the Supreme 
Court is bound to sustain, if knaves or fools in these or other 
times pass Acts of Congress for stealing their wages or 
earnings from them by an issue of legal-tender fiat money. 
There were many ways open to the Court for sustaining 
the legality of a forced loan, without debasing the science 
of law or forcing an interpretation to the cases cited in the 
opinion, when these very cases, if rightly interpreted, are at 
variance with the decision in this case. It may be true that 
students differ, and that the definitions of economists are 
at variance with each other upon this question of what is 
money. The more reason for a Court of competent juris- 
diction to give a definition consistent with right and justice, 
and to force all students or others who treat questions re- 
lating to money also to define the word in such a way that 
the substance cannot thereafter be confounded w'^h the 



6 • INTRODUCTION. 

shadow — the thing for the promise of the thing carrying no 
obligation for the performance of the promise. 

In this very question — the subject of this treatise — " What 
makes the rate of wages ? " this recent decision of the Court 
must be ignored as if it had not been rendered, because it 
vitiates every form of statement which can be submitted. 
If the standard by which the rate of wages is established is 
liable to be changed at the instance of an accidental ma- 
jority in any Congress, it ceases to be a standard. No 
scientific treatment of this or of any of the great economic 
questions now pending could be made consistently with such 
conditions ; nor can any sound or permanent conclusions be 
reached consistently with this decision. So long as it 
stands, all acts of fiscal legislation will be of a purely em- 
pirical nature. If the opinion given by Justice Gray on 
behalf of the majority of the Court is to be accepted, 
that a national lie — a promise which implies no obli- 
gation to maintain it, is lawful ; in other words, if a lie and 
a statute law can be consistent with each other, then truth, 
justice, history, and science alike reject and condemn the 
opinion by which such a conclusion has been reached. It 
would be out of place for an economist to venture to com- 
ment on the legal or technical grounds on which this 
opinion rests. Suffice it that in three trials the Court has 
been divided, and that there is as much weight of authority 
on one side as on the other, while outside the court it is 
difficult to find a lawyer of any high repute who sustains 
the present decision. 

In this treatise it will therefore be assumed that no money 
is entitled to the name except standard coin, containing a 
fixed weight of precious metal. Between two kinds of coin 
there may be a distinction. One may be good money, the 
other may be bad money ; witness our gold dollar and our 



INTRODUCTION. 7 

base silver dollar of light weight ; but both kinds of coin are 
money, while no kind of paper promise can be money. 
Paper can only serve as a substitute for money. The stan- 
dard by which we now work is the standard of gold coin ; 
but in the course of the treatise, many variations from this 
standard will have to be referred to, because during the 
period in which the country was subjected to the depreci- 
ated greenback currency, the rates of wages paid in terms of 
money served as no true guide to the absolute wages for 
which the work was done, as the purchasing power of this 
substitute for money varied with its own fluctuations, or in 
the ratio which it bore to the standard of gold coin. Among 
the minor evils of a vitiated currency is the uncertainty 
which is imparted to the statistical statements of the period 
in which it is used. Even a reduction of the currency 
prices of the war to a gold standard will only partially 
remedy this fault. 

I am well aware that many economists of repute have 
adopted such a definition of the word money as to include 
any instrument of exchange which may serve the purpose. 
In so doing it may perhaps be held that they have given 
some foundation for the charge that political economy is not 
a science. 

In the following treatise I have endeavored to prove the 
paramount importance of the question which serves as its 
title. Of what use would it be to treat the subject at all, 
or to attempt to analyze the forces which make the rate of 
wages, if there is no definite and established meaning to the 
word money in which the wages are rated ? 

Edward Atkinson. 

Boston, Mass., U. S. A., 
July, 1884. 



INTRODUCTION TO SECOND EDITION. 



The first edition of this treatise was pressed to comple- 
tion rather hastily, with a hope that it might have some 
influence on the legislation of the present Congress in 
respect to Railroads and Silver Coinage. 

A few errors have been pointed out by friendly critics, 
mainly owing to the slightly different results which are 
reached in reducing very large sums to rates of earnings per 
week or per day, without carrying out the decimals to such 
a point as would confuse the reader. None of these apparent 
errors affected the conclusions, and they have been corrected. 

But it will be observed that only approximate accuracy 
can be claimed when the attempt is made to reduce the huge 
figures of estimated national production to the unit of \vhat 
each person can enjoy each day. 

Suf^ce it that even if the estimate of annual products be 
varied for possible error by ten per cent., or $ i ,cxx),ooo,ooo 
(one thousand million dollars), the corresponding change in 
the share which each person may enjoy on the average each 
day would be only y?t'^ cents worth more or less. 

It has, perhaps, been a mistake, not to make a more com- 
plete separation of the theory of diminishing profits and 
increasing wages, from the statistics by which the theory is 
sustained ; but as the work grew upon the writer's hands 
from what was intended to be a short essay, suitable for 
presentation at the meeting of the British Association for 
the Advancement of Science, into a treatise of rnany pages, 
the theory and it^ application became so interwoven that 
the writer himself could hardly have separated them in any 
greater measure. 

Edward Atkinson. 

Brookline, Mass,, f(b, 19, 1885. 



WHAT MAKES THE RATE OF WAGES? 



The phenomenal circulation, in England, of Henry- 
George's book, entitled " Progress and Poverty," and the 
statement that it has already been translated into every 
civilized language although it made little impression in the 
United States, draws attention to the fact that all other 
questions have become relatively insignificant compared to 
the problems which relate to the distribution of wealth. 
The premises which Henry George assumes are without 
substantial foundation in fact and his conclusions are there- 
fore without warrant. The production of what constitutes 
wealth or welfare is no longer at issue. Modern science 
and modern instrumentalities of production are adequate to 
produce what would sufBce for a good subsistence for every 
man, woman, and child in any and all countries. The whole 
question at issue is the distribution of this substance after 
it has been produced. Production and distribution are but 
two phases of the same work. 

Land, capital, and labor are the three factors in produc- 
tion, but even when these three factors are worked in the 
most hearty co-operation, the world is always within a year 
or less of starvation. The main question, therefore, is : How 
is the annual product distributed ? because it is upon the 
distribution of the annual product that subsistence depends, 
rather than upon the ownership of land or of the products 
of labor which have been saved in a concrete form, and 
which have become capital. The capital or labor saved in 

9 



lO WHA T MAKES 

a concrete form never exceeds in value the sum of two or 
three years production, even in the richest state or nation, 
and is more apt to be less than the product of a single year. 

In the work of production and of distribution, by far the 
largest portion of the people of the so-called civilized world 
work for wages in one form or another, — that is to say, they 
are at any given time in the position of the employed rather 
than that of employers. They change from one class to the 
other, according to their relative abilities or opportunities. 
It follows of necessity that the paramount question — the one 
which is of prime importance to the vast majority of the 
people of civilized lands, is. What makes the rate of wages ? 
because it is by means of the money which they receive from 
their employers as wages, that their share of each year's 
annual product is obtained and is measured. This being 
admitted, the practical question at once arises, are those who 
labor for wages receiving in each year a less and less pro- 
portion of the annual product, while capitalists are securing 
for themselves a larger share, or the reverse ? Are the rich 
growing richer, while the poor become poorer ? or, are 
nations themselves becoming poorer as a whole, rich and 
poor alike securing a decreasing share of a decreasing and, 
perhaps, insufBcient product ? 

In treating this question, two definitions become neces- 
sary. What is production ? It is not simply the primary 
process of bringing forth grain, timber, and metals in their 
crude form, from the field, the forest, or the mine ; it is 
not simply carrying these products through the mill, the 
furnace, or the forge, into their secondary form, called man- 
ufactures ; but the word must include all that is indicated 
by its etymology — pro duco — pro-duce-ing — leading forth 
and directing the forces of nature to the final use of, or con- 
sumption by, man. This covers distribution, as well as what 



THE RATE OF WAGES? II 

is commonly called production. The word wages may, 
therefore, be defined so as to include all earnings of persons 
in the employment of others. The larger part of the work, 
in many directions, being done by the piece, the wage is an 
uncertain quantity, varying with the skill and capacity of 
the laborer. In this treatise the word wages will stand for 
the sum of money which is earned by factory operatives, 
farm laborers, machinists, mechanics, railroad employees, 
laborers, clerks, salesmen ; in fact, by each and every class 
of those who are employed by others in what is commonly 
called production or distribution : those who agree in ad- 
vance to work for a fixed payment, either by the piece or 
by the day, month, or year. 

The true wage which the workman seeks is the food, 
fuel, shelter, and other means of subsistence with which the 
sum of his wages will supply him. If we look to the 
derivation of the word itself, his wage is the measure of 
the expectation of subsistence, against which his labor is 
staked, wagered, or hazarded. It is not customary to in- 
clude the salaries of the clerical or administrative force, nor 
the payments which are made for purely mental work under 
this term, although they are of the same nature. For the 
purpose in hand, we will limit the application of the word 
wages to the sum of money earned by persons who engage 
in the actual work of producing or distributing material 
substances ; who either work with their hands or direct ma- 
chinery to these ends ; who are in the employment of other 
persons upon terms stipulated in advance and who are sub- 
ject to be discharged with or without notice, as the case 
may be, at the will of the employer. In this category will 
be found by far the largest portion of the people of this 
country who are old enough to become wholly or in part 
self-supporting. . 



12 WHAT MAKES 

This great class consists in very large measure of persons 
who depend almost wholly upon their daily work for their 
daily bread, — whose accumulations are small, — slowly and 
painfully made or saved, and sufficient only to relieve them 
from the necessity of work for the last few years of old age, 
if perchance adequate for that without the aid of their chil- 
dren. The welfare of the vast majority of the people of 
this country, and of every other country, therefore, mainly 
depends upon the adequacy of the rate of their wages and 
upon the purchasing power of the money in which their 
wages are paid. It follows that there can be no more im- 
portant social question than the wage question, — none in 
which error will be more fatal. 

If, under the existing conditions of employer and em- 
ployed, — of capitalist and laborer, — of wage-payer and wage- 
receiver, — in other words, if by way of competition the 
rich only grow richer because the poor grow poorer ; — 
if greater progress under present laws and customs is 
only consistent with greater poverty; — if the profits of 
capital can only be increased by diminishing the wages 
of labor; — if "wealth accumulates only when men decay," 
— then socialism may be justified, even nihilism may be 
right ; the capitalist may be the enemy of the laborer. If 
such is the truth, Henry George only goes half way in his 
remedy, when he merely proposes to nationalize or confis- 
cate land. The remedy for these great apparent wrongs 
may, in such event, be found only in dynamite and the 
dagger. If even the change in institutions or in the title to 
land which can be secured by legislation is insufficient, then 
dynamite and the dagger may be the only adequate remedy, 
as Wendell Phillips hinted, but even he dared not say so, in 
his Phi Beta Kappa oration. The very existence of modern 
society is the major issue which is bound up in the simple 



THE RATE OF WAGES f 1 3 

and apparently minor question, *' What makes the rate of 
wages f Compared with this all problems relating to the 
collection of revenue, the function of banks, the hours of 
labor, etc., sink into relative insignificance. If the funda- 
mental, question is, What makes the rate of wages? — these 
minor questions are merely the froth and turmoil upon the 
surface, which manifest to the eye and ear the great under- 
current which may rend modern society in twain. 

What are the facts ? Upon the continent of Europe, 
ancient forms of society, customs, laws, and institutions 
of many kinds, from which we in this country are 
substantially free, are being actually rent and destroyed, 
and the whole socialistic tendency of legislation at this 
time, in Great Britain, France, Germany, and elsewhere, is 
but an attempt to solve the apparently simple question. 
What makes the rate of wages, or of the earnings of 
those who depend upon their daily work to meet their 
daily wants ? By socialistic tendency is meant such acts of 
legislation as the Land Acts relating to Ireland lately 
passed by the Parliament of Great Britain ; the acts for 
compulsory life or annuity insurance which have been pro- 
posed by Bismarck; the attempts which have been made in 
France to own and control the whole railway system and to 
maintain national workshops ; and many other measures of 
like kind which have been either proposed or attempted in 
different parts of Europe. The issue is made more diffi- 
cult by the existence of conditions in Europe to which we 
have nothing analogous. The question there is not only : 
What makes the rate of the wages of the factory operative, 
the mechanic, or the artisan ? but, What makes the rate of 
earnings of the Irish cottier, or the rack-rented farmer, or 
of the English tenant farmer working leased land ; or of the 
French or German peasant confined to allotments which 



14 ^-^^ T MAKES 

have been mainly established by the compulsory divisioh of 
land on the Continent, and which have become so small by 
frequent subdivision that modern agricultural machinery can- 
not be applied to them in any great measure ; on which 
the crops are therefore made by the exertion of the max- 
imum amount of manual labor with the minimum of 
product per man ? An example may be here cited of 
the vast difference, in different places, in the productive 
efficiency of one man, working one year. I cannot give the 
exact measure per man in bushels of grain or barrels of flour 
of foreign agriculture, but the German or French peasant 
makes but a very small crop, who, with arduous toil with the 
spade and hoe, plants a little strip of grain, harvesting it 
with the sickle, and thrashing it with the flail ; every one 
can conceive how small a quantity of grain must be the 
product under these conditions, yet these are the conditions 
under.which a considerable, if not the larger portion, of the 
grain crops of Europe are made. 

On the other hand, let us consider an extreme ex- 
ample of the application of capital to great areas of land 
in this country. By division of labor and by the ap- 
plication of machinery upon the great farms of Dakota, 
such enormous abundance is secured that when we con- 
vert bushels of grain to the equivalent of one man's 
work, working 300 days in one year, we find that in an 
average year, on land producing twenty bushels of wheat to 
the acre, 5,500 to 5,600 bushels of wheat are made for each 
man's work. Retaining enough for seed, this quantity suf- 
fices to make 1,000 barrels of flour. It can be carried 
through the flour mill and put into barrels, including the 
labor of making the barrel, at the equivalent of one other 
man's labor for one year ; and at the ratio of the work done 
to each man employed upon the New York Central Rail- 



THE RATE OE WAGES f Ig 

road, the 4,500 bushels of wheat can be moved from far 
Dakota to a flour mill in Minnesota, and thence the 1,000 
barrels of flour can be moved to the city of New York, and 
all the machinery of the farm, the mill, and the railroad can 
also be kept in repair at the equivalent of the labor of two 
more men ; so that the modern miracle is, that 1,000 bar- 
rels of flour, the annual ration of 1,000 people, can be placed 
in the city of New York, from a point 1,700 to 2,000 miles 
distant, with the exertion of the human labor equivalent to 
that of only four men, working one year in producing, mill- 
ing, and moving the wheat. It can there be baked and dis- 
tributed by the work of three more persons ; so that seven 
persons serve one thousand with bread. 

Before we proceed further in the consideration of this and 
other related facts, let me say that there appears to be an 
almost unacknowledged belief, even among well-read stu- 
dents, that the so-called principle which Malthus first pro- 
pounded is true ; or at least that it contains such an element 
of malignant truth, if one may use such an expression, 
that it is unpleasant to face it, lest one's faith in the Power 
that makes for righteousness should be disturbed. If the 
dogma of Malthus is true, that population tends to increase 
faster than the means of subsistence, there is no escape 
from the conclusion that all our efforts at progress, so-called, 
are worse than useless ; for instance, when we attempt to 
save the life of children by the improved sewerage of our 
cities ; when we provide pure water and better dwellings 
for the poor, when we teach sanitary science to enable each 
and every member of the community to attain present bet- 
ter conditions of comfort and welfare and a longer life, we 
are merely building up our present prosperity in order that 
the adversity of a future day may affect a greater number 
of peoDle. If^ population increases faster than the means 



l6 WHA T MAKES 

of subsistence, the rate of wages must always tend to 
become a less and less proportion of a decreasing product 
and their purchasing power must at last become so low as 
not to assure even the necessary subsistence ; because there 
would not be substance enough to sustain life to be pur- 
chased by any wages which could be paid. In such a view of 
life all our humanitarian efforts are criminal if successful, 
because they cause a more rapid increase of population and 
only hasten the evil day when, in spite of every effort or of 
any measure of intelligence, our mother Earth will fail to 
provide for the wants of her children. They must then 
slay each other or die in myriads by famine and pestilence, 
in order that only the fittest may survive. Even then, 
when those only have survived for whom there is enough 
for the moment, the evil cycle would begin once more and 
\ so go on forever. It is upon the seeming truth which is 
^^ contained in this abhorrent and atheistic dogma that many 
false theories have been presented, many bad acts of legis- 
lation have been justified, and that it has become a wide- 
spread conviction that there is a war, or constant struggle 
and antagonism between capital and labor, — between rich 
and poor. It seems to be the conviction of great masses of 
people that with ever increasing wealth there is and must 
be ever increasing poverty, and this formula is working 
, in special places in the most active and pernicious manner 
at the present time. Again we may ask, what are the signs 
of the times? Russia struggling with nihilism; Vienna 
under martial law, for fear of socialism ; Germany and 
Austria dreading what may come when Bismarck dies ; the 
commune of Paris kept down only by fear and bayonets ; 
even England, gravely disturbed by a single book which 
attacks her land system, is coping with Irish destitution by 
acts of Parliament which are but socialism disguised and 



THE RATE OF WAGES? 1/ 

which would be overruled, if enacted by the Congress of the 
United States, the moment they were presented to the 
Supreme Court. These dangers to the body politic are 
signs that the struggle for life has indeed become urgent 
among great masses of people in spefcial and limited places. 
They indicate that even in the present day the horrors of 
the Reign of Terror might be repeated ; that want is law- 
less ; that hunger and destitution will incite to violence in 
5ny land ; and they also prove that the more the attempt is 
made to suppress these dangers by force of arm.s, the 
greater the danger will become. It would be as dangerous 
to disband the armies of Europe as it is impossible to sus- 
tain them, because the habit of government by force cannot 
be overcome except after many years. Yet, as I have said, 
in the world there is always enough. Production is ample 
to give good subsistence to every man, woman and child, 
especially in the civilized world, and the mechanism of dis- 
tribution is also fairly adequate. The whole question is 
one of the method of distribution of each year's product, 
and inasmuch as this distribution is mainly effected by way 
of the payment of wages, the paramount question is again 
presented ; 

WHAT MAKES THE RATE OF WAGES? 

If we glance again at the condition of the nations which 
have been named, we cannot help observing, for instance, 
that Germany is poor in fact ; the soil of large portions of 
her territory will barely sustain the people who dwell thereon, 
and although there has as yet been no absolute famine, the 
people of many parts of Germany are always on the very 
edge of want. We must therefore explain to ourselves the 
conditions of danger to which the best instructed people of 
Europe have been brought, by the. consideration of other 



1 3 WHA T MAKES 

matters. The people of Germany must be subsisted either 
upon what her own soil will produce, or upon the food for 
which her own manufactures will exchange. Her own 
annual product, at its exchangeable value in money, must be 
the source of her own profits, wages, and taxes. When we 
utter the last word, may we not touch one secret of her 
poverty ? There are money taxes and also blood taxes. One 
man in every twenty in Germany is a soldier in camp or bar- 
racks, and one other man in every other twenty must be em- 
ployed in sustaining the idle soldier, while every man wastes 
a considerable part of his life in preparation for this destruc- 
tive art and is liable to be called away from productive work 
at a moment's notice. Under such conditions, before either 
profits or wages can be paid to those who do the work, at 
least ten per cent, must be assigned to the wasteful and de- 
structive although generally passive war which is the condi- 
tion in which all the nations of Europe now exist. 

How is this army maintained ? There is room enough else- 
where, and to spare, for Germany to relieve herself of the 
population which cannot live upon her soil, except on the edge 
of starvation ; there is room enough even in our own land and 
here they would be welcome. But every German boy who 
reaches the age of eighteen is enrolled for service in the army 
at a future day, and if he dares leave the country after he is 
enrolled, he expatriates himself, renders any property which 
may be devised to him liable to confiscation, and can never 
return, even though he may have become an American citi- 
zen, except at the risk of being treated as a deserter, and 
forced to render his three year's service in camp or barracks. 
Under such conditions as these it follows that neither the 
poverty of Germany, France, Austria, Italy, nor any other 
country, can be attributed to any real antagonism between 
labor and capital, but must be attributed in part to the 



THE RATE OF WAGES? 10 

poverty of the soil, in part to artificial systems in the division 
of the land which are enforced by statute and in part to 
privileges and to the burdens of standing armies of which we 
have no counterpart. These dangers to the body politic are 
but signs that the struggle for life has indeed become urgent 
amongmassesof people who numbertoo many forthe limited 
area in which they are, but where they are kept by force, the 
natural law of distribution by which they might spread them- 
selves over the earth being obstructed. Much of this is 
done under the pretext that the right to property can only 
be permanently sustained by force, while the rights of man 
are denied. 

We may also observe that almost all modern dangers 
of war are dangers connected with the distribution of wealth, 
or from national jealousy in respect to commerce which is 
but another name for the distribution of the annual pro- 
duct of the world. This jealousy is mainly caused by the 
continued prevalence of the false idea that in international 
commerce what one nation gains another loses. Hence 
we find nations endeavoring to establish and maintain 
colonies, in order to control their commerce, at a cost to 
themselves of more than the whole commerce is worth. 

No one fights to-day for a religious dogma, unless it 
be an Arab or a Sepoy. None are armed merely to 
maintain a dynasty. It is the Chancellor rather than 
the Emperor on whose fate the Empire of Germany 
may depend. The question as to who shall control the 
Suez Canal endangers the peace of Europe, yet this canal 
is but a spout through which Europe exchanges clothing for 
food; it is a mere instrumentality of distribution. All 
modern questions of any importance relate to the means of 
subsistence ; the distribution of the means of subsistence is 
finally brought about by the payment of wages. The first 



20 JVHJ T MAKES 

question which England has met in endeavoring to promote 
good government in Egypt, is the debt incurred by a 
despotic power but imposed on the people who were op- 
pressed. Whether the repudiation of such debts is not 
the first condition precedent to the common welfare of 
those upon whom the debt has been imposed without their 
consent, is one of the many questions about to be forced 
to an issue in other countries than Egypt. If one half the 
product of Egypt is absorbed by the debt, will the other half 
suffice even for subsistence ? Can the sum of wages be more 
than what is left of her own product? Must not the annual 
product of each country be the source of its own wages ? 

As I have said, when we attempt to solve this question, 
we find that there need be no fear of want because there is 
not enough for all. Enough there is, and to spare. The 
only question is. Where is it ? Distribution is limited or 
restricted in part only by want of proper mechanism, /. e., 
by the lack of railways, the lack of ships, and the like ; in 
part by legal obstruction, in part by national jealousies, but 
yet more by obstacles to free exchange, even where the 
mechanism suflfices. I do not limit the term free exchange 
to the narrow question which is at issue between the advo- 
cates of free trade and protection ; that is a minor question. 
I mean the obstacles to free exchange which are mainly 
caused by that ignorance and incapacity which stands in the 
way of mutual service, even among the people of the same 
country. The farmer of our own land may have his barns 
running over with the abundance of his product, and may 
desire a hundred things for which he would be willing to 
exchange ; but if, on the other hand, those who desire to 
share his abundance are ignorant, incapable, or vicious, who 
cannot or will not work upon the things the farmer wants, 
there can be no mutual service : they may starve while his 



THE RATE OF WAGES ?^ "21 

crops decay. It is mainly the imperfect or restricted dis- 
tribution of what there is ready for use, which is caused 
by the ignorance or incapacity of those who need it, that 
creates want in the midst of plenty, not only in Europe, but 
in the heart of the great cities of our own land. We waste 
enough in this country to support all our poor in luxury; 
yet were we to give this excess to them in mere charity, 
what we waste, thus consumed, would forever convert the 
poor into paupers. Charity or alms-giving cannot remove 
pauperism ; it may only increase it. The common laborer, 
so called, is the one who suffers most in times of depression ; 
and he usually is and remains a common laborer merely be- 
cause neither his hand nor his head have been trained to- 
gether so as to enable him to do work requiring skill, which 
kind of work is everywhere and at all times waiting to be 
done, and by doing which he might become entitled to a 
share of existing abundance. We are attempting, in this 
country, to cope with these problems by legislative methods. 
In Europe the attempt is made both by legislative methods 
and by force combined. Neither method can permanently 
succeed. Neither wealth, welfare, nor common subsistence 
can be permanently imposed from above, or instituted from 
without. Neither masses of men nor individual men can be 
permanently helped who cannot or will not help themselves. 
The final remedy for these wrongs can only come by the 
development of individual manhood from within. Indi- 
vidual intelligence and integrity, sustained by public justice, 
constitute the sole condition under which permanent pros- 
perity can become the rule among men. Then life and lib- 
erty will be the only common factors, making for the wel- 
fare of each and all. It may be a far-off day, which none of 
us living may live to see, when this shall be accomplished ; 
but the potential agency in promoting this end is the ad- 
vancement of science. 



22 WHAT MAKES 

With the chemical or physiological question which under- 
lies the abhorrent dogma of Malthus, I may not attempt to 
deal. Subsistence is but a conversion of forces — a chemical 
process ; whether or not the proportion of force or energy 
which constitutes material life, and which takes the form of 
the body in which man lives awhile on this earth, may find 
a limit without recourse to war, pestilence, or famine to 
check its undue development, is not yet a practical question. 
When it arises, it may be time enough to meet it, in some 
far away period. 

The absurdity of the attempt, as yet, to measure the 
power of subsistence and to declare it to be limited can be 
demonstrated in two or three simple ways suitable to the 
use of a statistician like myself : First, no man yet knows 
the productive capacity of a single acre of land anywhere 
in respect to food. Second, the whole existing popu- 
lation of the globe, estimated at 1,400,000,000 persons, 
could find comfortable standing-room within the limits of a 
field ten miles square. In a field twenty miles square they 
could all be seated, and by the use of telephones in suffi- 
cient number they could all be addressed by a single 
speaker. Third, the average crop of wheat in the United 
States and Canada would give one person in every twenty 
of the population of the globe a barrel of flour in each year, 
with enough to spare for seed ; the land capable of produc- 
ing wheat is not occupied to any thing like one twentieth of 
its extent. We can raise grain enough on a small part of 
the territory of the United States to feed the world. The 
great American desert has gradually disappeared. The 
"bad lands" of Montana prove to be the best grazing 
ground of the Northwest, and in the heart of the Eastern 
States the mountain section of the South waits for a popu- 
lation equal to that of Great Britain, who can there find 



THE RATE OF WAGES? 23 

potentialities in agriculture or in mining equal to those of 
any similar area on this or any other continent. As yet, 
therefore, the doctrine of Malthus has found only a limited 
application, where some local or temporary congestion of 
human force has gathered. As I have said, in the world 
there is somewhere and always enough. The only question 
is, Where is it ? When found, the next question arises, 
How to get it ? 

The first method which obtained in the world, wais to 
grab it — the age of force. The second method was to give 
it — the era of conqueror and conquered, of master and slave, 
of lord and vassal, of giver and taker, not of employer 
and wage-earner. The third method is to exchange for it. 
Under this third method commerce has arisen, men have 
become sorted as capitalists and laborers, as employers 
and employed, as wage-payers and wage-receivers; service 
for service is the common rule of life ; the exchange of 
product for product is the practice of commerce. All 
States have, or may become interdependent, and then " the 
ships that pass between this land and that will be like 
the shuttle of the loom, weaving the web of concord among 
the nations." And again we meet the apparently simple 
question, What makes the rate of wages by which the 
greater part of these services are measured and under 
which the greater part of the distribution is effected ? 

I have had but little time for the reading of books or the 
consideration of theories of wages ; but I believe we must 
pass from the English orthodox system of political economy 
to France, in order to find the first true statement of the 
relations of the wage-receiver and the wage-payer, of em- 
ployer and employed, of laborer and capitalist, or of labor 
and capital. Many years ago a single phrase in Bastiat's 
" Harmonies of Political Economy " became engraved upon 



24 WJ^A T MAKES 

my mind, and by its application I have been enabled to ob- 
serve the phenomena of wages in the course of my business 
life with much clearer insight. It is this : ^' In proportion to 
the increase of capital, the absolute share of the total product 
falling to the capitalist is augmented, but Jus relative share is 
diminisJied ; zvhile on the contrary, the share of the laborer is 
increased both absolutely a)id relatively." 

Among English writers, Thornton exposed the fallacy of 
the old wage-fund theory, the theory that all wages are 
paid out of a fund of capital previously accumulated and 
will be high or low as the ratio of that fund may be great or 
small, in proportion to the number of persons employed. 
Professor Cairnes propounded the true theory of wages in 
one of his latest books, in terms so nearly identical with 
some of those which the writer had used in this treatise, 
that the writer would have suspected himself of unconscious 
plagiarism had he not found his own records antedating the 
published works of Professor Cairnes on this subject. In 
this country, Professor Francis A. Walker has presented the 
true theory of wages in the most effective manner and has 
probably done more than any other writer to clear the sub- 
ject of obscurity. It has been a matter of great satisfaction 
to me, that my practical observations are so fully consistent 
with the theories of these authors. Giving due credit to 
all these writers, my own conclusions have been based 
almost wholly upon facts and deductions from business ex- 
perience rather than from books, although my attention was 
first attracted and a direction was given to my observa- 
tions by the paragraph which I have quoted from Bastiat. 

The two forces which are engaged in the production of 
the substances which constitute food, fuel, means of shelter, 
or the materials which may be converted into additional 
capital, are of course, labor and capital, Land itself is but 



THE RATE OF WAGES? 2$ 

an instrument, being useless and valueless unless labor arid 
capital are employed upon it. By the co-operation of these 
two forces, an annual product is made. The true function 
of capital is that of a force put to use in order to increase pro- 
duction, rather than a substance to be immediately divided 
and consumed. 

Fixed capital, so called, although the name is hardly a 
suitable one, may be likened to the foundation, boiler and 
engine, and quick capital to the fuel with which the boiler is 
supplied : the one is very slowly, the other very quickly con- 
sumed, yet neither works directly to the subsistence of men, 
but indirectly both work to the vast increase of the actual 
substances with which men are fed, clothed, and sheltered ; 
these substances constitute the annual product which is 
divided among them. The term annual fits the case, because 
the year represents the course of the four seasons and the 
succession of crops. A small part of each year's annual 
product, commonly called " quick " or " active capital," must 
be carried over to start the next year's work upon, as a small 
part of last year's product had been brought over to start 
this year's work upon ; one proportion balancing the other. 
The fixed capital seldom exceeds in value two year's pro- 
duction. It therefore follows that all profits, all wages, all 
taxes, in fact all consumption whereby existence is main- 
tained, must be substantially drawn from each year's product ; 
it is therefore in the division of these substances produced 
within the year, that true profits and real wages are to be 
found. But, in order that this product may be distributed 
and consumed, since no man lives, economically speaking, 
for himself alone, the various products of the year must all 
be exchanged by purchase and sale, and therefore must all 
be measured in and reduced to terms of money, — except that 
part of the annual product which is consumed upon the 



26 WHAT MAKES 

farm by the farmer and his family without being sold. With 
this exception, it therefore follows, that substantially the 
whole product of each year must be converted into terms of 
money. I think it escapes common observation, that in all 
departments of industry, except agriculture, few men now 
produce any thing which they use themselves; and even 
in farmers' families, domestic consumption is now limited to 
a small part of the farm product, all else is procured by ex- 
change ; all men are interdependent. The sum of money 
represented by this conversion is and must be vastly greater 
than the sum of real or actual money which is used as the 
instrument of exchange, hence the necessity for true money. 
The greenback fallacy can only deceive those who fail to 
comprehend the function of money. Inconvertible paper 
money is a fraud, and the burthen of proof rests upon its 
advocates to justify the honesty of their intentions by the 
weakness of their intellects. In this process of conversion 
into terms of money by way of purchase and sale, a part of 
the value of the annual product is sorted on the one side as 
profit, rent, interest, or by whatever name the share of the 
owner of capital may be designated ; and, on the other side, 
another and vastly greater part constitutes the share of those 
who do the work, and is named wages. In the subdivision 
of this latter share into individual parts, the rate of each 
persons wage is established in terms of money. 

It would not be consistent with the general purpose of 
this treatise to attempt at this point to give precise details 
in respect to the value of the annual product of a normal 
year in money. The general conclusion at which I have 
arrived is, that in the year 1880, the census year, when the 
population of the United States numbered a little over 
50,000,000, the annual product had a value of nearly or quite 
$10,000,000,000 at the points of final consumption, includ- 



THE RATE OF WAGES? ^ 2'J 

ing, at market prices, that portion which was consumed upon 
the farm but which was never sold. Omitting that con- 
sumed upon the farm, it was about $9,000,000,000. What 
portion of this product constitutes the average share of the 
capitalist at the present time cannot be substantially proved. 
In a normal year, under normal conditions I am of the pro- 
found conviction that not exceeding ten per cent, can be 
set aside as either rent, interest, profit, or savings ; and that 
nine tenths constitutes the share of the laborer, which, by 
subdivision, becomes expressed in terms of personal wages,. 

During recent years, the increased efficiency of the railway 
service, and the consequent elimination of two thirds of the 
cost of distributing commodities in bulk, has undoubtedly 
augmented for a time the amount falling to the capitalist, 
but without in any measure reducing the amount previ- 
ously falling to the laborer ; on the contrary, greatly promot- 
ing the laborer's interest as well as that of the capitalist. 

The great fortunes of the railway magnates (aside from 
one or two conspicuous and notorious thieves who have 
stolen franchises and defrauded their stockholders) have 
consisted of but a small portion of what they have saved 
to the community. The main work of railway capitalists 
has been to reduce the cost of distribution ; their true 
function ought not to be prejudiced by the fact that a judge 
of one of the courts of a neighboring State was impeached 
and disqualified from holding any office of trust or honor 
for " corrupt practices " with a notorious railway official. 
The corrupt judge is dead — the corruptor of the judge still 
lives a base and dishonored life, probably continuing to 
exist physically because he is mentally and morally in- 
capable of conceiving the turpitude of his existence or of 
feeling the loathing and contempt of the community. But 
even the railways which he has constructed will continue to 



28 WHAT MAKES 

serve some useful purpose after the corruption which he has 
engendered has been buried with him in a nameless grave. 

In treating this question of the rate of wages, it must 
constantly be kept in mind that money is but the instru- 
ment of exchange, that real wages are what the money will 
buy, and there cannot be more real wages than the whole 
product, less the share of capital. If then, we can even 
approximate the value of the product and divide by the 
known number of persons employed, we then approximate 
the annual measure or average rate of wages in terms of 
money. 

At the risk of repetition this point must be further con- 
sidered, as it is the key to this treatise. 

The population of the United States, in the census year, 
consisted of a little over fifty million persons, or about ten 
million families of five each. Substantially one in every 
three was engaged in some kind of gainful occupation. 
Agriculture was and is the leading occupation. Upon small 
farms, a large portion of the produce is consumed by the 
farmer, his family, and his laborers. Upon large farms, the 
greater part of the produce is sold. In the families of coun- 
try mechanics, much productive work is done which in cities 
is procured by purchase. We can only approximate in a 
general way the value of the domestic consumption. If one 
tenth of the consumption of the country is of the nature of 
purely domestic production and consumption, which is never 
converted into terms of money by purchase and sale, the 
total sum which would represent such domestic consump- 
tion would be $20 to each person, $100 to each family, or 
$1,000,000,000 total value. Of this the census enumerator 
would find no trace in the figures of commerce. This is a 
large estimate, undoubtedly, of the domestic consumption 
of articles which might be or might have been procured by 



THE RATE OF WAGES? 2g 

purchase, but which were in fact produced and consumed 
without purchase or sale. The remainder of the annual 
product, at whatever sum of money it may be finally val- 
ued when sold for the last time and distributed for final 
consumption, constitutes the value of the product converted 
into terms of money, from which sum all money profits, all 
money wages, and all money taxes must be derived. There 
can be no other source. Each bargain for a sale or a pur- 
chase is and must be made in terms of money. The manu- 
facturer, the merchant, and the shopkeeper take their toll 
of profit in money, not in kind. The assessor levies a tax 
payable in money. When this tax is levied upon a pro- 
ducer or a distributor, it is charged to the cost of the busi- 
ness, and is thus distributed among those who buy the 
goods for consumption. The laborer receives his wages in 
money, seldom in kind, except the farm laborer ; he then 
converts his money into his share of the annual product by 
the consumption of which he sustains life. The total sum 
of money which represents the value of all that is produced, 
at its point of final consumption, is and must be the final 
measure of that part of the annual product which is bought 
and sold. Therefore, all profits, wages, and taxes constitute 
a portion of this lump sum ; in order to ascertain what the 
rate of profit, the rate of taxation, or the rate of wages may 
be, we must ascertain what this lump sum is, and how it is 
divided. On the other hand, by ascertaining what the total 
sum of taxes, the sum of all wages, and the sum of all profits 
may be, we can again approximate the total value of the 
annual product. No absolute results can be reached by 
either method, but approximate results can be fairly set off, 
one against the other. This is what the writer has endeav- 
ored to do. 

The principle which I have attempted to sustain in this 



3P WHA T MAKES 

treatise may be considered without any regard to its appli- 
cation to the existing figures of the present date. I have 
given these figures, however, in the way of an illustration. 
They will be more fully treated in appendix I. 

The principle might be stated in algebraic symbols. For 
instance, given the question, " What is the value of the an- 
nual product of the year 1884?" It would consist of the 
following elements : First, the wear or consumption of fixed 
capital previously accumulated ; the proportion of the quick 
capital or product of the year 1883 brought over to and 
consumed in the year 1884, in order to begin work. Let 
these two elements be called a. To them would be added 
the actual product of the year. Let this be called b. From 
this product a certain proportion would be carried over, to 
begin the work of the year 1885. Let this be called c. The 
formula could then be stated in the following terms: 
a-\-b — t: =z ^, the annual product which is subject to sub- 
division and to consumption. 

Let profits be called d, sum of all wages e, persons en- 
gaged in gainful occupation for a given rate of wages, f, 
and the average rate of wages i. The complete formula 
would then be as follows : 

a -(- b — c = X 
X — d=i e -^f= i 

If i be the average of all there is, one wage earner will 
earn less, another more, according to relative capacity and 
opportunity, and by competition each with the other: but 
these earnings, differing each with the other, will be ab- 
solutely within the limit of i ; while i itself will annually 
stand for an increasing share of an increasing product, if my 
premises are sustained. 

In a computation of what makes the total accumulated 
wealth of the United States, which was made by the Census 



THE RATE OF WAGES? 3 1 

Department, one half the value of the product of mines, 
oil wells, and the like, was taken as being on hand at a given 
time, constituting a part of the accumulated wealth, together 
with three fourths of the annual product of agriculture and 
manufacturing. Working from these data, it appears that 
the census estimate of the value of the annual product of 
the United States for the census year was from $8,200,000,- 
000 to $8,500,000,000, not including domestic consumption. 
There appears to be no actual computation of the value of 
the annual product in the census, but the figures used in the 
computation of wealth yield these approximate results. 
The writer had reached his own conclusions by very differ- 
ent methods from those used by the Census Department, 
and had satisfied himself that if there be added to that part 
of the annual product which is sold, and which is, therefore, 
reduced to terms of price in money in the markets of the 
world, the domestic consumption upon farms and in.families, 
the total value of the annual product would not exceed 
$10,000,000,000 in the census year, at the retail prices for 
final consumption. If the census estimate be divided by the 
population of substantially 50,000,000 people, we reach 
$160 to $170 per year as the sum representing the average 
annual product for each person, or a fraction less than forty- 
four to forty-seven cents per day for 365 days. That is to 
say, when the products or services of each person were 
brought into competition in the markets of the world, the 
money value of the entire commercial product in the census 
year was measured by the average sum of forty-four to forty- 
seven cents' worth to each person. My own computation 
gives a little under $200 to each person, including the 
domestic consumption of farmers, or a little under fifty-five 
cents' worth per day. That is to say, the average product 
of each person may be estimated by any one who will go 



32 WHAT MAKES 

into the market, hire shelter, procure food and clothing, 
and save something out of what fifty-five cents a day will 
pay for for each member of a family. If no more is pro- 
duced, no more can be had. What there is may be bought 
and sold ten times over; it only wastes a little each time; 
it does not increase. Paper may be substituted for true 
money, and the rate of paper wages may be apparently 
doubled, but then it will take $i.io in paper to buy what 
fifty-five cents gold now buys. There cannot be any more 
shelter, food, fuel and clothing sold than there is produced, 
and the value in money of all that there is produced is the 
final measure of all profits and wages. The subdivision of 
all there is produced, therefore, makes the rates of both 
profits and wages. 

If, again, we call $1,000,000,000 the domestic consump- 
tion, and value the salable portion at $9,000,000,000, and 
then divjde by the whole number of persons in productive 
work (excepting soldiers and minor Government employes), 
to wit, 17,300,000, we reach an average of $520 as the annual 
measure of the productive services of each person thus 
engaged in useful work, each one at work sustaining two 
others. This computation may be proved to be substan- 
tially correct by a comparison with the actual wages or 
earnings of all classes, which were treated separately in the 
census, giving due consideration and applying judgment to 
the relative value of the work done. (See appendix I. for 
exact comparison.) 

It may, therefore, be assumed that the average value of 
the gross product of each person who was engaged in any 
lucrative or productive employment in the United States in 
1880, can be fairly established in the census year at a sum 
closely approximating $520. If such is the measure in 
money of all that was produced, then all wages, profits. 



THE RATE OF WAGES? 33 

taxes, and all savings or additions to capital must have 
been derived from such a sum. There can be no other 
source for either, unless the country incurred a foreign debt, 
which it did not in any great measure. It paid more debt 
in the census year than it incurred. 

If such is the gross sum, let us see what the net sum free 
from taxes, may have been. In the same census, the gross 
sum of all National, State, county, and municipal taxation, 
was computed in round figures at over $700,000,000, or 
over %Ap per capita of all persons engaged in gainful occu- 
pations. If we apply this rate to the average share of the 
product which fell to each person who was occupied in 
gainful occupation, we reach the following result : Gross 
product, $520 ; taxation a little under 8 per cent., $40.00 ;' net 
share of the annual product, free of taxes, valued at $480. 
Now it will be apparent if only one in 2.90 persons is em- 
ployed in gainful or productive- occupations, then 2.90 per- 
sons must be subsisted upon what $480 per year, or $1.32 
per day, will purchase, or 45^ cts. worth to each person ; if it 
be considered also that from this sum must be set aside 
profits or additions to capital which take precedence of 
wages or earnings, then it will at once appear that by far 
the larger part of each year's product must be consumed ; 
that is to say it must enter into the cost of production. In 
point of fact each year's work barely suffices for each year's 
wants and but little can be saved or added to capital be- 
cause it is evident at a moment's consideration that not 
much can be saved out of what 45 cents will buy for each 
person each day. There is no absolute method of determin- 
ing the exact proportion of the annual product which can 
be set aside as profit or addition to capital, nor of ascertain- 
ing that part which constitutes the actual wages or earn- 
ings. All that can be said is this : If 10 per cent, of the 



34 WHAT MAKES 

gross product can be set aside in a normal year, for the 
maintenance or increase of capital, that is to say, $48.00, 
out of each person's net share of the whole, then the aver- 
age rate of wages or earnings of all the people of this 
country engaged in gainful occupation, is at the rate of 
$432.00 per annum, $1.19 per day or $1.44 per working day. 
This result, again, fairly approximates to the disclosure of 
the census, if it be compared with the specific ascertained 
earnings of persons engaged in special branches of industry. 
If any thing, it is a large estimate rather than a small one.' 
If the foregoing premises be admitted, it follows of ne- 
cessity that so far as those who work for wages are con- 
cerned, the relative or proportionate rate which each one or 
each class may receive cannot be in any very large measure 
affected by the sum which is set aside as profit or increase 
of capital, but must be mainly affected by the competition 
of laborer with laborer aqd will be finally determined by 
the relative efficiency of each person within the limit 
of the average proportion which his class receives out of the 
annual product. That is to say, the relative condition of 
each class of laborers must be determined by the variation 
from a standard or average which is determined by the 
quantity and price of the aggregate product of that class, 
/. e., in that special branch of industry. The general rate of 
wages can therefore only be raised by an increase of product 
coupled with a wider market commensurate with such in- 
crease, so that the price may be maintained. Absolute 
wages may be increased although the rate in money may 
not, by an increase in the product, accompanied by a 
decrease in the price, so that the same or a less rate of 
wages may buy more commodities. The gross product 
may be increased by two methods only ; first, by the intel- 

' See table of earnings or wages in appendix. 



THE RATE OF WAGES? 35 

ligent use of the increase of capital ; and second, by the 
more intelligent co-operation of labor with capital. Con- 
tention or antagonism can only result in diminished rates 
both of profits and of wages. Prices and rates of wages 
can only be maintained by enlarging the market as labor 
becomes more effective and a greater quantity of things is 
produced by a decreasing number of persons. When a 
greater quantity of any given product is made by an 
improvement in machinery or a new invention, and men 
who have before been employed in that art are no longer 
wanted — then a wider market must be found for products 
which remain within their capacity to produce. Hence, 
those nations which apply machinery in greatest measure, 
and thus increase the quantity of their product while di- 
minishing the cost as well as the number of persons em- 
ployed, possess the greatest power of competition in supply- 
ing other nations in which all the arts are mainly handicrafts. 
For instance, England and the United States compete with 
each other in supplying China with a portion of the cotton 
fabrics needed by the Chinese (supplying perhaps ten per 
cent, of the cotton fabrics which are consumed in China) in 
exchange for tea, silk, etc., etc. The cultivation and pre- 
paration of tea and silk being of necessity handicrafts, this 
exchange would occur even if no climatic condition entered 
into the case. The exchange of fabrics made by machinery 
for tea and silk, yielding each nation what it needs with the 
least effort, although the quantity of labor varies greatly. 

It therefore follows that the power to control commerce 
with the non-machine using races, who constitute more 
than three fourths of the population of the globe, rests 
with that nation which applies machinery most effec- 
tively to the greatest natural resources, and whose pro- 
duct is least diverted from being applied to profits and 



36 WHA T MAKES 

wages by destructive taxation, such as the support of a 
great standing army or costly navy. 

The invention of machinery creates commerce. If we re- 
vert to the former conditions of life in the different sections 
of the United States, may we not find an explanation of the 
vast increase in the domestic commerce of the country, in the 
greater interdependence of each section of the country upon 
each other section, as well as in the greater interdependence 
of individuals upon each other. Exchanges of product for 
product have widened and increased, perhaps in greater 
measure than the aggregate product itself. If we recall the 
conditions of life of the New England farmers and artisans 
in the early part of the century, a very small money income 
sufficed them, because they lived mainly upon what they 
produced themselves, and because many of their exchanges 
were made without the intervention of any money. They 
swopped or bartered services in the erection of their dwell- 
ings and in harvesting ; they raised, spun, and wove their 
own wool ; they packed their own pork ; they raised their 
own corn and paid for grinding it by a toll in kind ; they 
cut their own fuel. These primitive conditions can even 
now be observed in the mountain sections of the Southern 
States. But even under such conditions, the consumption 
of food and fuel of each person may not have varied greatly 
in quantity or weight from that of the present time. It 
differed greatly in kind and in quality, and also in the 
method by which it was attained ; but the quantity of food 
in ounces, which is the final standard, cannot greatly vary 
in one period as compared to another. We waste a great 
deal more now than we did in those early days, but our 
actual consumprton of food per person cannot have increased 
in any very large measure. In the primitive days, under 
these primitive methods, the labor was so arduous and the 



THE RATE OE WAGES? 37 

hours of work were so continuous that only the strongest 
survived. The figures representing commerce were very 
small and when wages were paid at all, they were at very low 
rates for long hours of merely manual labor. Under the mod- 
ern method of extreme subdivision, and the application of 
adequate machinery, i. e., capital, the labor is less toilsome, 
the hours of work are shorter, the weakest can find some- 
thing to do, each serves the other, and in the process of 
manifold exchanges, the figures representing commerce rise 
to almost incomprehensible millions ; yet the actual quan- 
tity consumed, as I have said before, may not have varied in 
any great measure, so far as food and fuel are concerned. 
So far as clothing is concerned, production and consumption 
have increased enormously. 

The end of all this vast system of exchange is, however, 
that, in one way or another, each person may secure about 
three pounds of food per day, a few yards of cotton or 
woollen cloth each year, two or three tons of coal or five or 
six cords of wood a year, and a given number of cubic feet 
of space, sheltered by a roof. They needed as much per 
person of the absolute necessaries of life fifty or a hundred 
years since as they do now, but they obtained them only by 
working twice or thrice as hard. They were more independ- 
ent, less interdependent. There was far less capital, and 
much more arduous and excessive labor. The conditions 
of life were more equal, but it was the equality of sordid, 
continuous, excessive manual labor, aided neither by the 
factory nor by the railroad ; neither by the more modern in- 
ventions of the masters of science, nor by the administrative 
and organizing power of the great capitalists, without whose 
potential work all modern progress would have been sub- 
stantially impossible. The fortunes which those great di- 
rectors of industry have made for themselves bear but the 



3S tVHA T MAKES 

proportion of a small fraction to the labor which they have 
saved their fellow-men. 

I will repeat again what I have said before : the late 
Cornelius Vanderbilt may be taken as an example of a com- 
munist in a true sense. He was the greatest communist of 
his age. He consolidated and perfected the railroad service 
in such a way that a year's supply of meat and bread can be 
moved one thousand miles, from the western prairies to the 
eastern workshops, at the measure of cost of a single day's 
wages of a mechanic or artisan in Massachusetts — that is to 
say, if the mechanic or artisan of the East will give up one 
holiday in a year, he removes one thousand miles of dis- 
tance between himself and the main source of his supply of 
necessary food.^ 

* I have cited the late Cornelius Vanderbilt as the great communist of his age 
for the reason that he may be said to have first invented the consolidation of a 
through line of railway from the prairies of the West to the markets of the East, 
with a consequent reduction in the cost of bread and meat to the dense popula- 
tion of the Atlantic seaboard. By this consolidation and effective service, 
one thousand miles of distance have been substantially overcome at such a 
small cost as to have rendered the choice of position, at any point within that 
range, a matter of so little moment in respect to the supply of Western food as 
to be practically out of consideration. For instance, the value of the product of 
five hundred operatives in a coarse cotton factory in Massachusetts is over one 
million dollars — all the wesfern flour and meat which these operatives need in a 
year can be moved from Chicago to Lowell at a cost of $600, and sometimes 
for less. 

It is sometimes urged that such great fortunes as that of Vanderbilt and a 
few others are against the public interest, and that some method ought to be de- 
vised for limiting their accumulation. This ungrounded prejudice has mainly 
arisen from the jealousy rightly caused by the great fortunes which were accu- 
mulated by expert gamblers under the malignant system of the greenback 
or legal-tender paper money before these notes had been made redeemable in 
gold coin. 

It is very true that the most of the fortunes which were made out of the 
fluctuations of the currency were speedily lost, but the foundations of a portion 
of the most conspicuous existing fortunes were laid under these bad conditions. 

It is hoped, and may be believed, that advocates of paper money will 



THE RATE OF WAGES? 39 

Having attempted to estimate the main factors which de- 
termine the general or average rate of wages at a given time, 
we may now consider the subdivision or the forces which 
affect the subdivision of the true wages fund. Why is the 
average rate of wages in a given occupation two dollars a 
day in one place, and one dollar a day in another, within the 
same country at the same time ? Or, why has the rate of 
wages in the same place been one dollar a day at one period, 

never again be enabled to impose such a malignant instrument of fraud upon 
the community. 

Other fortunes which rightly excite jealousy, and which might, perhaps, have 
been prevented by legal measures, are those which have been made by fraud 
and by the abuse of trust in corporations on the part of a very few conspicuous 
or notorious railway promoters and speculators. They need not be named 
because, fortunately for the welfare of the community, the number of persons 
who have successfully stolen the property of those who trusted them is very 
limited ; hardly more than one name will come to the mind of any person as the 
chief exponent of this nefarious class at the present time. 

But in regard to such persons it may be said that they are in the nature of 
monstrosities ; they are the spawn of a corrupt period ; in one way or another, 
the man who corrupts a court will be abated in some way as a public nuisance, 
if death does not fortunately remove him, or ruin does not overtake him. 

The great fortunes of those who have fairly earned them by their capacity to 
direct and use great masses of capital in the most efficient way, cannot be a sub- 
ject of jealousy, suspicion, or distrust. As well might large steam-engines be a 
cause of distrust and a clamor be raised for the substitution of a number of little 
ones. 

I have endeavored to show how both the rate of wages and the purchasing 
power of the wages depend wholly upon the abundance, ready distribution, and 
quick sale of the joint product of capital and labor. 

It is now constantly affirmed by certain enthusiasts and sentimentalists, who 
are sustained by cranks and demagogues, that, inasmuch as all production rests 
ultimately upon labor, therefore laborers are entitled to the first consideration 
and the remuneration of capital ought equitably to be subjected to the prior 
claims of labor. 

This extreme position is the exact reverse- of the conception of the relations 
of labor and capital which prevailed during the first half of the present 
century, when the science of political economy first became a matter of real 
study. At that time capital received the first consideration and labor was 



46 tVITA T MAKES 

and two dollars a day at another, at different times ? Third, 
why is it that one true dollar will buy more in one place 
than two true dollars will buy in another ? Why do abso- 
lute wages vary, as they do and have varied, in such propor- 
tions as are indicated by the rates in money ? And why do 
the rates of wages vary even when the prices of commodi- 
ties are the same? In answer to such questions as these we 

deemed subordinate, or subject, we might say, to capital. One extreme posi- 
tion is as utterly false as the other ; both are mischievous ; but, if injustice is 
done in either direction, it is the laborer who suffers most and the capitalist who 
suffers least. Perhaps the greatest measure of suffering to laborers who are 
nominally free will be caused when capital and capitalists are subjected to un- 
just restrictions and injudicious discrimination. 

The main purpose of this treatise has been to bring into most conspicuous view 
the great fact that capital is a force which may be applied to the increase of 
prodiiclion and y^\)\(i}a. promotes abundance in the greatest measure ; but that it 
is not a substance to be divided, on the division of which the wages of the 
laborers depend. 

Now, every great force requires the most intelligent and careful direction ; 
the greater the force, the greater the measure of the intelligence and care re- 
quired. For instance, since the introduction of the steam-engine, or the appli- 
cation of gunpowder to the purposes of mining, no force has been applied with 
such general benefit to humanity as the railroad whereby the products of the 
richest sections of the world's surface are distributed over the widest area. 

So long as the railway service between the East and the West constituted de- 
tached sections, several of which existed betwean Albany and Buffalo, as well 
as elsewhere between New York and Chicago — each section being worked un- 
der a different administration more or less effective — the general service was 
ineffective and costly. 

It required a man of positive genius in the use of capital and of the greatest 
administrative power to bring into effect the consolidation of this single line. 

It matters not what the motive of the late Cornelius Vanderbilt may have 
been. It matters not what may have been the motives of those who consoli- 
dated that most wonderful organization of all, the Pennsylvania system of rail- 
ways. It matters not what may have been the motives of those who have laid 
out the several great systems which are scattered over the country, since Van- 
derbilt set the example and led the way. The general result of all this work 
has been a reduction of the railway charge for moving merchandise through- 
out the United States to the lowest possible point consistent with leaving any 



THE RATE OF WAGES? 4I 

are often answered with the orthodox expression : " Supply 
and demand determine such points." But this is no con- 
clusive answer until we know under what law the supply 
has been assured, and under what law the demand exists. 
These terms, supply and demand, are commonly used as if 
each were absolutely certain to induce the other ; but such 

incentive of profit sufficient to induce the great masters of the subject to 
continue their work. 

This work is not that of the laborer in the sense in which that word is used 
by so-called labor reformers. It is not labor in the common acceptation of the 
term, yet it is an effort of the human mind of such a quality that except capital 
had thus come under the control of these men all the efforts of laborers would 
have utterly failed to promote the general welfare. The farmers of the West 
would have "smothered in their own grease," and would have continued to 
burn their Indian corn for fuel, while the workman of the East might have 
starved or would have been compelled to labor long and arduously on the sterile 
soil of New England, in order to obtain a mere subsistence. 

The true function of capital and of the capitalists is of the utmost beneficence. 
It cannot be exerted in the present condition of the world except by way of the 
ownership of land and of capital, subject to the limitations and to the duties 
which are implied by existing laws. That the relations of labor and capital 
may be measurably changed and perhaps improved by changes in legislation es- 
pecially in respect to taxation, may not be denied ; but the fundamental prin- 
ciples of individual ownership subject only to the right of eminent domain and 
to the payment of taxes are essential to that abundant production and ready dis- 
tribution which makes for the general welfare. 

As human nature is now constituted the individual control of capital is essential 
to its adequate use. Corporations are of the nature of artificial persons, and 
even they never succeed unless there is some one man capable of becoming the 
head or chief officer, sustained by as many able assistants as the case requires. 

Even the successful co-operative shops in Great Britain exert the closest com- 
petition in purchasing their goods and pay very high salaries to the persons who 
do this part of their work — else they would surely fail. Every co-operative 
factory is under the personal control of a well-paid superintendent. 

"The tools to him who can use them." Capital is a tool which cannot 
be used except to the mutual benefit of capitalist and laborer. Service for ser- 
vice is its necessary law — the only open question is the ratio which each service 
bears to the other, and, if my observations are sustained, the law of competition 
is that the ratio of profits diminishes while the rate of wages steadily increases. 



42 WHAT MAKES 

is far from being the truth, except it may be after a long 
interval of time. Capital may become so effective by the 
improvement of the machinery in which it consists that a 
few laborers may be able to supply an article of the utmost 
necessity in such rapid and excessive measure as to keep 
the quantity beyond the purchasing capacity of those who 
need it ; the need may exist, but the demand — that is to 
say, the purchasing capacity — is limited not only by outside 
conditions, but by personal mental capacity and manual 
ability of consumers. We may assume, for instance, a com- 
munity consisting of cotton growers, who raise and pick cot- 
ton as a handicraft, and of cotton spinners and weavers who 
have, also, spun and woven the cotton fibre as a handicraft 
upon spinning wheels and hand-looms. These two classes 
now exist side by side in the mountain sections of the South. 
Up to a given date these two sets of persons may have ex- 
changed services with each other in the ratio of one spinner 
and one weaver to four growers of cotton ; or, in order that 
we may be able to eliminate those who are displaced by an 
improvement in machinery, we will assume greater num- 
bers ; say in the ratio of one hundred spinners and weavers 
to four hundred growers. But suddenly capital, in the form 
of a cotton factory, takes the place of hand spinning and 
hand weaving ; the capacity of a single person operating the 
machinery of a modern factory being sixty- to one hundred- 
fold the capacity of a hand worker, and the outside market 
for the cotton fabric being only among the cotton growers, 
one hand in the factory exchanges with them, taking their 
cotton and furnishing them with cloth, and ninety-nine 
hand spinners and weavers are displaced. They may know 
no other art. They demand cotton fabrics to cover their 
nakedness, but they can no longer exchange cloth for 
cotton. The cotton growers may be able to increase their 



THE RATE OF WAGES? 43 

product in some measure, but they cannot or will not ex- 
change with the hand spinners and weavers when they can 
exchange on better terms with the factory. The cotton 
growers and the factory operative may each have more than 
they had before, and may each prosper ; but until the 
ninety-nine hand spinners and weavers who have been dis- 
placed can qualify themselves to do some other service for 
the cotton growers, or until the cotton growers have devel- 
oped a want for something else than hand spinning and 
weaving, there may be no equality in the distribution of 
the greater supply of cotton fibre and of cotton fabric ; 
there may be want in the midst of plenty. The hard and 
fast rules of supply and demand must therefore be varied 
according to the capacity of the persons on whose wants 
supply and demand are predicated. We heard a great deal 
about over-production during the long depression between 
1873 and 1879, and we are hearing the same cry of over- 
production at the present time of depression in 1884. Why 
is this ? Over-production simply means an excess of food, 
fuel, and means of shelter ; in other words, it means supply 
of capital. It cannot be said that the people of this coun- 
try all have so much food, fuel, and shelter that there is no 
demand for any more. On the contrary, want exists ; the 
need is urgent, but the demand does not become potential 
because something is wanting to bring supply and demand 
to the terms of an exchange. It takes two to make an ex- 
change. One may have what the other wants, but if the 
other cannot serve the one, both suffer — one from over- 
production, the other from under-consumption. 

We may perhaps find a clue to this apparent paradox by 
a consideration of one single branch of industry — to wit, the 
construction of railways. A railroad is, to all intents and 
purposes, a product of handicraft. The work done in the con- 



44 WHAT MAKES 

struction of a railroad mainly consists in positive, direct hu- 
man labor, in levelling the way, filling up the valleys, pierc- 
ing the hills, working in mines and in blast furnaces. Every 
mile of railroad added to our existing measure stands for 
the work of about fifty-six men, mostly cojnnwn laborers, 
working one year. In 1882 we constructed over 1 1,500 miles 
of new railroads. In 1884 we shall construct less than 5,000 
miles. More than 400,000 common laborers have been dis- 
charged from work by this change in this one branch of 
constructive enterprise. They want food, fuel, means of 
shelter, and clothing now as much as they did in 1882 ; they 
represent need or potential demand. Over-production, on 
the other hand, represents supply; but until other work 
within the capacity of common laborers is found, the wants 
or demand of these men will not be met, and the over-pro- 
duction or excess of supply will not be consumed. The 
final end of such a condition is, of course, that pauperism 
ensues unless an adjustment of labor can be made, and the 
over-production or excess will then be distributed by the 
noxious method of alms-giving or State aid. The only true 
remedy is to develop the individual capacity of each commo?i 
laborer and to render him capable of performing more than 
one kind of service. To use a Yankee expression, we must 
evolve "gumption," which is a purely personal quality, in 
order that there may be neither over-production nor under- 
consumption. 

Let us now return to the direct question : What makes the 
rate of wages ? I will now challenge your attention by sub- 
mitting certain paradoxical propositions which I will pres- 
ently prove by examples. Although subject to exceptions 
and to temporary interruptions, they take the form of rules of 
substantial and uniform application if time be given them to 
work. In any given country like the United States, where 



THE RATE OF WAGES? 45 

the people are substantially homogeneous, where the 
means of inter-communication are ample, where there are 
no hereditary or class distinctions, and where there is no 
artificial obstruction to prevent commerce, high rates of 
wages in money will be the natural and therefore necessary 
result of low cost of production in labor. That is to say, 
the two forces of capital and labor being combined in the 
production of any given commodity, the greatest quantity 
of that commodity will be produced where the conditions 
are most favorable and where the least number of persons 
is therefore required to do the work. 

To that point, the best workmen and the most adequate 
capital will surely tend. This product, whatever it may be, 
will then fall into the general market of the country, to be 
converted into terms of money by sale, and will there meet 
other commodities of like kind which have been produced 
elsewhere under less favorable conditions or by less skilful 
persons, with the application of less adequate capital, i. e., 
poor machinery. That portion which has been produced 
under the best conditions, will therefore be the representative 
of the work of the smallest number of persons ; and that 
which is produced under the least favorable conditions, of 
relatively the larger number of persons. Equal quantities 
from each source being sold, the sum of money recovered 
from the sale will be the same, and it will of course yield on 
the one hand to those most favorably situated, large profits 
and high wages to the small number employed ; and on 
the other hand small profits and low wages to the larger 
number less favorably placed. These relative conditions 
may continue for very many years, as it is not easy to change 
the place either of capital or of large forces of laborers. All 
will not go to the most favorable place, because there are 
many other things than mere money which control the disposi- 



46 WHA T MAKES 

tion of population. For instance, I have given some figures 
relating to the production of wheat on the great plains of the 
far northwest. The wheat there produced is greater in quan- 
tity in ratio to the capital and to the number of laborers em- 
ployed, than in any other part of this country, and wages 
are very high in the harvest season ; but it does not follow 
that every person who has been engaged in raising wheat in 
Central New York will leave his farm, whether he be owner 
of the farm capital, or laborer. There are many conditions 
of life in Central New York which will keep men there in 
preference to migrating to Dakota, even though both profits 
and wages be less. Hence it follows, that although the total 
production of any given thing may not be concentrated at the 
very best point, it will yet be found to be true that where 
the conditions are the best, the cost measured in terms of days 
of labor will be lowest, and the wages measured in terms of 
money per day will be the highest ; the high money wages 
being the necessary consequence of the low labor cost. Con- 
versely, low rates of money wages are the natural and neces- 
sary result of a high labor cost of production. This rule mainly 
affects such products as are made by handwork, or which of 
necessity remain handicrafts, i. e., work in which the hand 
is assisted only by very simple tools of which each opera- 
tion is guided by the hand. In such cases both the materials 
worked upon and also the product may bear a very high 
price ; but the work upon them, not being aided by effec- 
tive machinery, the quantity of labor will be very large, and 
the result of the sale may therefore leave but a very small 
sum to be divided among very many laborers after the cost 
of materials has been set aside. All mere handicrafts are 
quickly overcrowded, except such as call for artistic or 
original power of design. For instance, after the pattern is 
drawn it takes merely manual dexterity to make Brussels 



THE RATE OF WAGES? 47 

lace. The material which is used in this branch of industry- 
is fine and costly cotton thread, which is converted into lace by 
hand without the aid of any machinery whatever, but merely 
by the use of two or three simple tools ; the lace-makers of 
Brussels are among the poorest of the poorer classes of 
European operatives. They work at the very lowest rates 
of wages, which will barely keep them in existence, but 
their product is of very high cost in money. The very best 
Lyons silks and German velvets are other examples. They 
are made upon hand-looms of the most primitive kind. Beet- 
root sugar is another example. Beets require constant hand 
work in weeding. We cannot afford the time or labor for 
such work so long as we can exchange wheat raised by 
machinery for money and with the money buy our sugar. In 
all handicrafts the quantity of labor is very great, but even 
at the high prices which such products bring, the total sum 
of money recovered from the sale leaves but a very low rate 
of wages to be divided among those who have performed the 
work. 

It thus becomes very apparent that the rate of wages 
must be determined by what the product will bring in the 
market, from which must be deducted materials and profits. 
The total annual product may be converted into a lump sum 
of money, which will represent the combined result of the 
sale of each particular part of the annual product, each part 
of which has been separately converted into a definite sum 
of money by sale. From the gross sale of the whole the 
general rates of wages and profits are, and must be derived ; 
and from the sale of each particular part the rate of wages 
and the rate of profit on that part /. e., in that branch of 
industry, must be measured and defined. 

So long as we consider the total product of the United 
States as a unit or single subject of division, the conception 



48 ^^A T MAKES 

of that division may be limited to the two objective points 
of profits and wages. 

Reverting to the algebraic formula, a simple statement 
serves : x being the value of the annual product, the for- 
mula is : X — a (profits) = b (the sum of the wages of all 
persons employed). But when we take up any special art 
the proposition becomes a very complex one, and it is 
extremely difificult to separate the various elements of a 
given cost, except by the measure in money in which such 
elements of cost are usually expressed. Each part of the 
work must be considered separately in order to prove that 
the rate of wages of each body of workmen who are en- 
gaged in each part of the work constitutes a remainder over, 
and is a result or consequence, rather than an element or 
measure of cost, as it is usually considered. 

We may perhaps solve this problem by an example, and 
for this purpose a cotton fabric may best be taken, because 
it is an example of production to which the highest art in 
the application of machinery is necessary in one department, 
as well as the lowest-priced manual labor, but little aided 
by machinery in another. 

The elements of a cotton fabric are : 

1st. Cotton, including the profit of the cotton farmer, 
the wages of the cotton laborer, and the wear and tear of 
the capital or tools used in the production of the fibre. 

2d. Other materials, which need not be considered sepa- 
rately, as the same principles which govern the supply of 
cotton also govern these. 

3d. The transportation or movement of the cotton to the 
factory. 

4th. The wear and tear or depreciation of the factory 
resulting both from use and from the invention of better 
machinery. 



THE RATE OF WAGES? 49 

5th. The wages or earnings of those who do the work. 

6th. If taxes are levied upon machinery, the capitalist will 
also assure himself that he can charge the taxes as a part of 
the money cost of the goods before he builds the mill, and 
thus distribute them upon consumers, but they do not of 
necessity enter into this consideration. 

With respect to cotton, no attention need be given to any 
assumed value of land in the southern United States, con- 
sidered merely as land. The area of cotton cultivation has 
never yet equalled three acres in one hundred of the area of 
the cotton States, and if the same measure of intelligence 
were applied to cultivation in all the States which was given 
to cotton production by the late Parish Furman, of Georgia, 
the whole commercial cotton crop of the world, including 
that of the United States, India, Egypt, and South Amer- 
ica, could be produced on one fifteenth part of the area of 
the single State of Texas. 

The price of cotton, therefore, yields profits to the farmer 
and wages to the laborer; as time goes on, the two are be- 
coming more and more identified. The price of the cotton 
is determined by competition in the great markets of the 
world — in Liverpool, Havre, and New York. When the cost 
of transportation has been set aside and the profit of the cot- 
ton farmer has been realized the remainder over, although it 
is but a small sum per pound, yet suffices to pay the laborers 
upon the cotton farms of the United States the highest rate 
of wages earned by the cotton cultivators of the world — a 
far higher rate than can be attained by the ryots of India, 
the fellahs of Egypt, or the peons of South America. The 
purchasing power of the wages of the negro of the southern 
cotton field is also very high v/hen measured by his wants; 
he prefers bacon and corn—" hog and hominy " — v/itli a 
little molasses, to any other food ; his v/eek's ration consists 



50 WHA T MAKES 

of three and a half pounds of bacon and one peck of meal, 
and this can be furnished him at fifty to seventy cents per 
week, according to the season and to the abundance of the 
western crops, or at seven to ten cents per day. The food 
of the rice-fed races of India costs less nominally, but if con- 
sideration be given to the force concentrated in and repre- 
sented by the food, there is probably no other laboring force 
in the world which can be subsisted at so low a cost, either 
measured in labor or in money, as the freed negroes of the 
South. 

The price of raw cotton being thus determined, the place 
at which it may be converted into cotton cloth must next 
be determined. Into this question many conditions enter: 

1st. The use of water or steam power. 

2d. Climatic conditions. 

3d. The density of the population and the capacity of the 
separate members of the population to do the work. 

4th. The proximity of the factory to the market in which 
the principal demand exists. 

5th. The consuming power of the community in the 
midst of which the factory is placed, and their ability to 
buy the products for which the cotton fabrics made in 
excess of their own wants are exchanged. 

Omitting all consideration of fine cotton fabrics, which 
perhaps depend upon the relative or constant humidity of 
the atmosphere in the choice of the place where they are to 
be made, but which are of little relative consequence in the 
supply of clothing, — and limiting our attention to pure cot- 
ton fabrics of heavy or medium weight, which constitute the 
most important portion of the supply of such fabrics, it ap- 
pears that the lowest cost of production has been attained 
in some of the principal factories of New England, of which 
the specific data are given in the appendix. The fabrics 



THE RATE OF WAGES? 5 1 

>■ - ''~~-- 

made in these factories meet those of other countries in 
China, India, Africa, and South America, and are there sold 
in competition. The price received has thus far suf^ced to 
defray the cost of the materials, the transportation of the 
cotton from the southern field to the northern factory, the 
heavy local taxes, a reasonable rate of profit to the owners, 
and the remainder over has sufificed to give the operatives 
the highest rate of wages earned in this art in any part of 
the world. Whether this superiority can be maintained by 
New England in competition with the Piedmont section of 
the Southern States is now considered an open question by 
some observers. In this treatise it will suffice to call atten- 
tion to two facts by which the propositions herein submitted 
are fully sustained. 

1st. That in this art the rate of profit in a given product 
has steadily diminished, and the rate of wages (or of the re- 
mainder over) has as steadily increased. 

2d. That in the most important division of this art, to 
wit: the manufacture of coarse and medium fabrics from 
cotton unadulterated with clay, the highest rate of wages 
(or remainder over) is realized where the cost of production 
is lowest, i. e., in New England. 

In treating this subject it matters not whether this result 
has been reached by means of a protective tariff, or in spite 
of one. It is admitted that special rates of wages in a par- 
ticular art may be raised by the exclusion of a foreign 
product of like kind, so long as the price of the domestic 
product is maintained above what it would otherwise be ; 
but this is exceptional. I have selected examples of pro- 
ducts of which the price is determined both by domestic 
and by foreign competition, in order that the main question 
may not be confused by any prejudice for or against any 
special policy. Reference will be made hereafter to the 



52 WHA T MAKES 

conditions under which the policy of protection may or may 
not be expedient. ' 

* In this connection the writer may venture to express an opinion as to 
the place in, or section of, the United States where the cotton manufacture will 
be gradually concentrated. 

It has been submitted that the most ample capital and the most skilful labor 
will tend to the most favorable place, because at that place the remainder over 
of which wages consist will be the greatest proportion recoverable from the sale 
of the product. 

Steam having substantially displaced water as the motive power of the factory, 
the climatic or atmospheric conditions in which the cotton fibre can be most 
successfully spun and woven have become perhaps the most important elements 
in determining the place of conversion. In England thei-e is a steady and con- 
stant trend of the spinning mills to the points where the deposition of moisture 
is most uniform, and where the humidity of the atmosphere is most constant. 
There is scarcely a spindle left in Manchester and there are eleven million spindles 
in Oldham, a town which has grown from insignificance to this importance in a 
veiy few years. It is about 800 feet above the level of the sea, on the edge of 
the level moors at a point where the deposition of moisture is constant. In 
this country it may perhaps happen that cotton spinning will be concentrated 
more and more along the coast of the southeastern part of Massachusetts, in 
Rhode Island, and along the coast of Connecticut, where the influence of the 
Gulf Stream is most apparent, and where cotton and fuel can be laid down at the 
least proportionate cost of transportation. It will be observed that in the annual 
expenses of families living upon an income of $500 to $800 per year the cost of 
mere subsistence is sixty per cent, of the whole expenditure. In the section 
designated the staple articles of western food — grain and meat — can be deliv- 
ered at a cost of $5 per ton for over 1,000 miles of distance, and one ton suffices 
for a years' ration of grain and meat for four or five persons. On the other 
hand, this section has a positive advantage over almost any other in respect to 
groceries and in the supply and preservation of vegetables, while its distance 
from the cotton field is fully offset by its greater proximity to the principal mar- 
kets for goods. The colder climate of winter gives a necessary stimulus to in- 
dustry, and is more readily qualified than the excess of heat in the southern 
summer. Hence it may happen that at this point, or in this section, the 
highest wages will always be the remainder over from the manufacture and 
sale of staple cotton fabrics. 

In this section the population will also be likely to remain more dense, and 
also more capable of great diversity of employment and subdivision of labor. 
These are very important considerations, since the margin of profit is becoming 



THE RATE OF WAGES? 53 

Wages are held to be a consequence — a result — a remain- 
der over after capital has received such profit as will have 
induced it to undertake the work ; the rate of wages cannot 
therefore be considered a true measure of the cost of pro- 
duction. Wages are a consequent result, and their measure 
or rate is, and must be, determined, in the long run, by 
what the product will bring, and not by what the capitalist 
may either promise or be willing to pay for a given time. 
He may not be able to forecast the future in such a man- 
less and less. It may almost be said that in all the great arts the profit is found 
in the utilization of the waste or of the secondary product of the factoiy, and in 
the facility with which the machinery can be kept up without the necessity of 
maintaining a large force of spare hands under constant pay. Hence the iso- 
lated cotton mill, which is far away from the paper mill on the one side and the 
machine shop on the other, is at a relative disadvantage which tells against it in 
the close competition under which a quarter of a cent on the yard of cloth is 
equal to four or six per cent, on the capital invested. This tendency of partic- 
ular arts to become fixed in particular places calls for more attention than has 
yet been given to it, in order that the reasons may be fully comprehended and 
their influence on wages considered. 

It would be a matter of curious interest to study the forces or influences 
which made gloves the chief product of Gloversville in New York, and gave the 
town its name ; why card clothing is made chiefly in Leicester and Worcester, 
Mass. ; why men's heavy boots are made in Spencer and Brookfield, and 
women's boots and shoes in Lynn ; why brass work of certain kinds is con- 
ducted so largely and exclusively in a few towns in Connecticut; etc., etc. 
There are, of course, very obvious reasons why primary work of many kinds 
should be found in special places, but the reasons for the concentration of sec- 
ondary work are not so plain, and a study of the causes might yield most valu- 
able results, especially in their effect upon the remainder over which makes the 
rate of wages in these arts. 

The time has been when fine cotton yarn has been spun in England, sent to 
France to be woven, to Germany to be dyed, and brought back to England to 
be sold. The best flour of Minneapolis is even now in some small measure sent 
to London to be baked into biscuit, and is brought back to Boston and New 
York to find a market. If profits and wages were not recovered from these 
movements in greater measure, they would not occur. What are the subtle 
causes of such commerce ? 



54 ^^A T MAKES 

ner as to be able to carry out a single promise which he has 
made in advance of the sale of his product. The sum but 
not the rate of the wages in any given quantity of products 
may serve as a means of comparison of the money cost 
when persons who are engaged in the same branch of busi- 
ness desire to compare their conditions ; but the rates of 
wages constitute no measure of comparison unless the con- 
ditions under which the work is done, — that is to say, unless 
the quality and kind of machinery, the materials used, the 
advantage of position, the hours of labor, and other elements 
of the real cost, are absolutely identical. 

I have said that in a country which is inhabited by a 
homogeneous people, the rate of wages will be highest where 
the conditions of production are most favorable, because the 
quantity or intensity of the labor will there be least and the 
product will there be greatest. In like manner when ex- 
changes are made between two different countries, each 
country will exchange with the other some portion of its 
own product, which it can make under the most favorable 
conditions, or in excess of its own needs. The two products 
being each converted into terms of money will be exchanged 
as equivalents, without any regard to the proportion or 
quantity of labor which each represents. We may exchange 
one day's labor in a Lowell factory in the manufacture of 
drills, for one hundred days of labor in China in the prepara- 
tion of tea. It matters not what the rate of wages of the 
Lowell operative had been, or what the earnings of the 
Chinamen handling tea had been ; their product is conver- 
ted into terms of money, and is exchanged at certain prices 
which represent a given number of yards of drills for a giv- 
en number of pounds of tea. Each is an equivalent to the 
other. No one asks what the rate of wages or the quantity 
of labor in each has been. The wages are the result, not the 
antecedent. 



THE RATE OF WAGES? 55 

When the exchange is continued — it proves that each party 
makes a profit by the transaction. The Lowell operative 
could not have produced the tea, the Chinaman could not 
have produced the American drill ; when the exchange is 
made, the tea sells in America for more than the equivalent 
of the drill there, and the drill sells in China for more than 
the market price of the tea there ; therefore there is a cer- 
tain sum of money, or result of labor expressed in terms of 
money, to be divided among the laborers in each country, 
in excess of what there would have been had not the ex- 
change been made. The final result of the labor of the 
Lowell operative is the number of dollars which the tea 
brings, less the cost of transportation ; that sum is more 
than the drills would have brought at home, else they would 
not have gone to China. 

Try this on a little larger scale. We now import into 
the United States, annually, materials which are free of duty 
to the value of $200,000,000, and we exchange for them, at 
this measure in terms of money, the surplus of our cotton 
which we could not now spin ourselves, — the surplus of our 
oil which we could not now burn ourselves, — and the surplus 
of our wheat which we could not now eat, even if every man 
had every day all the bread he could possibly consume. 
What we send out is our surplus, our excess, a part of our 
over-production which could not be converted into terms of 
money at any price, or which would have reduced the price 
of the whole product if it were retained ; if retained at home 
it would yield nothing to divide in terms of money as the 
equivalent of such excess, among those who did the work. 
But the substances for which we have exchanged this excess 
having been brought Into the country where they do pos- 
sess a value of $200,000,000 or more, there is that additional 
sum to be converted into terms of money and subdivided 



56 WHAT MAKES 

in profits and wages. In the use of this foreign material, 
much of which enters directly into the work of domestic 
manufactures, all wages are therefore, by so much higher 
than they would have been otherwise. There is so much 
more to be divided in terms of money, because so much 
has been added to the quantity of things which could be 
used ; while the cotton, oil, and wheat sent out from the 
country could not have been used. Now, it matters not what 
may have been the rate of wages paid in the production of 
the cotton, wheat, or oil ; and it matters not what may have 
been the rate of wages paid in raising the wool of Australia, 
in making the tea of China, or in saving the hides of South 
America. We may receive the work of ten men for one 
day at twenty cents a day, for the work of a single man 
working one day for two dollars. By so much as the 
quantity of labor in our exportable commodities is less than 
the labor in those which we import, will the rate of wages 
be higher to our home labor as the necessary result of the 
exchange, because so much additional substance has been 
added by import from abroad to the quantity of things for 
which a home market could be found. This import has 
been received in exchange for home productions, for which 
there is no market, because they are in excess of home 
wants. There can be no continuous commerce unless there 
is a continuous service or profit to both parties. 

It follows that the nation which has diminished the 
quantity of human labor in greatest measure by the applica- 
tion of machinery, produces goods at the lowest cost, and 
by exchange with the hand-working nations, who still con- 
stitute the majority of the people of the world, are, by way 
of such exchange, enabled to pay the highest rate of wages 
in money, because their goods are made at the lowest labor 
cost. This is the secret of English commerce. 



THE RATE OF WAGES? 5/ 

The rates of wages are higher in England than in any 
country with which she makes -large exchanges, except the 
United States. She buys largely from us in spite of our 
higher wages, because byway of high wages we make grain, 
cotton, meat, oil, and many other articles necessary to her 
use at a lower cost in money than any other nation. 

Having thus attempted to present the principle at issue in 
this matter, let us now consider its application. The only 
problems of any great importance which are now presented 
to the people of this country for their determination, consist 
of the various problems in regard to the collection of the 
revenue, to the banking system, to the quality and kind of 
coin which shall be a legal-tender in the settlement of debts, 
and other fiscal questions. The tariff, the currency, the bank- 
ing system, and the coinage are the only political questions 
of any moment. Fortunate for us that it is so, and that we 
are free from the complications of other countries. Strange 
it is, and true it is, that the most difficult political question 
to be dealt with by the people of the United States is, Jiow 
to get rid of a surplus revenue. 

Neither one of these problems can even be stated without 
immediate reference being made to their bearing upon the 
rates of wages of the people of this country. 

Aside also from questions of revenue, banking, and 
coinage, the relations of men to each other cause discus- 
sion, — the hours of labor, the respective duties and rights 
of employers and employed, competition and cooperation, 
and all the other subjects which are customarily sum- 
marized under the general term of " the labor question." 
Not one or all of these questions can ever be discussed 
without an immediate consideration of the rate of wages. In 
every speech, in every essay, and in every conversation by 
the way, upon any of these subjects, the rate of wages 



58 WHAT MAKES 

comes at once to the front, and, as a rule, one or the other 
of the following propositions is almost invariably assumed, 
all of which are the very reverse of being true, and all of 
which are inconsistent with the law of wages which I have 
attempted to propound. All such discussion serves but to 
confuse the mind, simply because no distinction is made 
between the rate of wages and the sum of wages, and be- 
cause it is assumed that all laborers or operatives are 
equally efficient. 

I again desire to express the hope that the form of 
these propositions may not prejudice any one, be he an 
advocate of protection or of free trade. The so-called 
principle of laisscr faire is by no means implied in this trea- 
tise. The welfare of laborer and capitalist rests upon many 
other conditions than the rate of profits or wages, but the 
forces which determine these rates must be fully considered 
before any intelligent discussion of any social question can 
be undertaken. It is to these forces that I have endeavored 
to limit this treatise. I will state these fallacious proposi- 
tions in order, as follows : 

POPULAR FALLACY NO. I. 

The cost of production of any given article can be ascer- 
tained by finding out and comparing the rates of wages 
paid in its production in different places, here or elsewhere. 

POPULAR FALLACY NO. 2. 

Low rates of wages are necessary to low cost of produc- 
tion ; high rates of wages can only be paid consistently with 
high cost of prpduction. 

POPULAR FALLACY NO. 3. 
Inasmuch as laborers work for wages, wages enter 



THE RATE OF WAGES? 59 

directly into the cost of production, therefore cheap labor 
can only be assured by the payment of low rates of wages. 

POPULAR FALLACY NO. 4. 

An employer must of necessity be able to hire laborers at 
low rates of wages in order to make goods at low cost. 

Now if one asks any employer which workman is the 
first one to be discharged in a period of depression,— 
the workman who, being employed by the piece, earns 
the lowest rate of wages for himself, or the one who 
earns the highest, — unless some other question than the 
mere cost of goods enters into his consideration he will 
reply: " Why, the poor workman will be discharged 
first, of course, — he who earns the lowest rate of wages." 
Each employer understands perfectly well in his own busi- 
ness that the cheapest man, — that is, the man who does the 
most work for the least money is the one who works the 
greatest amount of machinery with least stops, i.e., the most 
eflective workman ; in manual labor it is the strongest ; in 
a handicraft it is the one who possesses the greatest manual 
dexterity; in the operation of machinery it is the one who 
understands the machine best and can get the most work 
out of it. The very man who may have taken part in a dis- 
cussion in which he has assumed that the popular fallacies 
which I have recited are unanswerable truisms, will never 
conduct his own business consistently with them, and if he 
did he would be sure to fail sooner or later. 

The true cost of any given article is the quantity of labor 
or the human effort expended in its production ; now, if we 
consider a human being as an automatic machine, similar to 
any other mechanical power or force, the true cost is the 
quantity of food and fuel expended in the conversion oi a 
given amount of material substance into human force. 



6o WHA T MAKES 

How true this is has been proved by Brassey in his coi 
parlson of the cost, even in money, of the labor of the 
English navvy as compared to the Hindoo or any other of 
the rice-fed people of the world. This human effort is 
measured or converted into terms of money, and it is the 
sum of the wages, not the rate, which constitutes the money 
cost; to this sum the rate of wages may bear a large or a 
small proportion. Wages in money are the instrumentalities 
for procuring food, fuel, and shelter ; and the worker is 
practically the more effective, the more money he can earn, 
or, in other words, the more money he can spend in a judi- 
cious manner for a good subsistence. The English navvy 
may be instanced again as being worth twice as much, 
either in the measure of his work, or by converting the 
measure of his work into wages, as the rice-fed coolie. He 
earns more, he spends more, he eats more, and he does more 
than double the work. Therefore, although he attains a 
high rate of wages, the result of his labor will be a lower 
cost of production. Again, the skilful weaver who can 
tend six looms, and keep each loom moving, being paid 
by the piece or according to the quantity of cloth woven, 
earns higher wages than the unskilful weaver who only 
tends four looms, and has one stopped a large part of the 
time ; the sum of the wages of the six-loom weaver is the 
least in proportion to the quantity of cloth produced. The 
high wages represent the low cost. 

Not very long since, a German steamer, on the way to 
New York, was very much damaged, so that very extensive 
repairs became necessary. It was decided to do the work 
of repairing in New York, as it appeared difificult to 
send her back to Bremen ; but the agents were instructed 
to report in Bremen, day by day, the number of men 
employed and the rates of wages; which report they 



THE RATE OF WAGES?, 6 1 

made. When the first report was received in Bremen, a 
telegraphic message was returned, ordering the steamer 
back to Bremen for the completion of the repairs, for the 
reason that the owners of the line said that they could not 
afford to pay such high rates of wages, being well assured 
that the cost of repairs would be more than what they would 
of necessity expend in Bremen. But it was too late ; the 
work had been begun and it was necessary to finish it in 
New York. When the final account of the sum of wages 
was sent to Bremen, it proved to be a less amount than the 
same repairs would have cost in Bremen. Since then there 
has been no reluctance to repair these German steamers in 
New York. 

Again, the rates of wages may be precisely the same in 
two factories in the same place, and yet the cost of produc- 
tion will vary so much that one mill will prosper while the 
other will fail, because the quantity of product will vary, and 
the profit or loss of any textile factory rests mainly upon 
the quantity of yarn spun and of the goods woven. There 
may be many reasons for this difference : in one mill the 
machinery may be old, in the other new ; in one the mate- 
rial may be well selected, in the other badly ; in one the 
goods may be well sold, in the other badly sold ; in one the 
goods may meet the fashion, in the other they may be out 
of date, although better in quality. Under all these vary- 
ing conditions, the source of wages being the money pro- 
duced by the sales, high wages may have been paid consis- 
tently with low cost of production in one factory ; and low 
wages may have been paid, notwithstanding the high cost 
of production, in the other ; or, if the cost of production be 
the same, the goods of one mill being well sold and those of 
the other ill sold, the sum left to be divided might amply 
suffice for high profits and wages in the one case, and be 



62 . WHA7' MAKES 

deficient in the other. Thus, difference in management 
will alter results, in the same place, at the same time, in 
the use of similar machinery. The same management will 
yield different results, both in profits and wages, on dif- 
ferent machinery. The same management and similar 
machinery will yield high wages in one place, and the 
reverse in another, at the same time, because the condi- 
tions vary in other respects. 

I have submitted these several propositions under the 
name of popular fallacies. It will be apparent that a very 
large part of the discussions in respect to hours of labor, in 
respect to taxation, and to all other matters connected with 
the so-called labor question, are commonly based upon them, 
and the common conclusions are as fallacious as the propo- 
sitions. 

A true theory of the source of wages and their actual re- 
lation to productive industry is therefore necessary to any 
intelligent discussion of any of the questions now before 
the country. 

The wage question must be treated from four points of 
view. 

First. — What individual effort is required to earn a given 
sum of money in a given time ? 

Second. — What is the purchasing power of that money ? 

Third. — What are the relative efforts, as well as relative 
sums of money earned in the form of wages, by those 
who compete in a given product in the same or in different 
countries ? 

Fourth. — What is to be considered in addition to the cost 
of materials and the rate of wages, in placing the goods pro- 
duced at the point of consumption ? 

The fallacies which have been previously submitted may 
be met by counter propositions, all of which can be sub- 



THE RATE OF WAGES? 63 

stantially sustained ; exceptions being readily designated, 
and the reason for such exceptions being readily found. 

First. — The rate of wages constitutes no standard even of 
the money cost of production ; which cost must be made up 
by adding together the sum of all wages and dividing by 
the product, in order to establish a unit of cost in money 
by way of a unit of measure — whether by the yard, barrel, 
or pound. 

Second. — Low rates of wages are not essential to a low 
cost of production, but on the contrary usually indicate a 
high cost of production, — that is to say, a large measure of 
human labor and a large sum of wages at low rates. Con- 
versely, high rates of wages may, and commonly do, indi- 
cate a low cost of production, — that is to say, a small 
proportion of human labor and a small proportionate sum 
of wages at high rates in a given quantity of product. 

Third. — Cheap labor, in a true sense, and low rates of 
wages are not synonymous terms, but are usually quite the 
reverse. 

Fourth. — An employer is not under the necessity of se- 
curing labor at low rates of wages in order to make cheap 
goods, but he may and commonly does pay high rates of 
wages, for the very purpose of assuring the production of 
goods at the lowest cost, — that is, in order to be able to sell 
them on the lowest terms, or " cheap " in the popular sense. 

The abuse of the word cheap leads to more mischievous 
fallacies than any other abuse of language. The cheapest 
labor is the best-paid labor ; it is the best-paid labor applied 
to machinery that assures the largest product in ratio to 
the capital invested. 

If these propositions can be sustained, it may be submitted 
that the more the capitalist increases his wealth and applies 
it to reproduction, the more the welfare of the laborer is 



64 WHA T MAKES 

assured. The competition of capital with capital tends 
constantly to a decrease in the ratio of the profit of capital 
to the total production, and of necessity tends also to a con- 
stant increase in the rate of wages of the laborer; thereby 
more than counteracting the tendency of the competition of 
laborer with laborer to diminish wages. 

I will now attempt to prove these apparently paradoxical 
propositions by one of many examples by means of which this 
theory can be sustained. It will be taken from the records of 
the cotton manufacture, not only because this branch of indus- 
try is most familiar to myself, but because it was almost the 
first of those which were brought under the factory system 
by division of labor, and under this system factory accounts 
have been kept in the same way from the very beginning. 

In 1830, when the first statistics in my possession are 
dated, the average earnings of all the operatives in a large 
cotton-mill, who then worked thirteen hours or more a day, 
and among whom were comprised a much larger proportion 
of men than at the present time, while the women were 
older and there were fewer children, were $2.50 to $2.62 per 
week. The quantity of machinery which each hand could 
tend was much less ; the production of each spindle and 
loom was less; the cost in money of the mills per spindle 
or loom much greater, while the price of cloth was at times 
more than double the price at which it can now be sold 
with a reasonable profit. The average earnings of all the 
female operatives in what purports to be the same factory, 
at the present time, on the same fabric, working ten or 
eleven hours a day, under vastly better sanitary conditions, 
both in the factory and in their dwelling-houses, are $5 per 
week, and in some cases even $6 — or more to the most skil- 
ful. That is to say, women only now earn about twice as 
much in ten hours as men and women combined averaged 



THE RATE OF WAGES? 6^ 

in thirteen hours a little over forty years ago.' Between 
these two dates, subject to various fluctuations from tem- 
porary causes, the course of events in this branch of indus- 
try has been as follows : A continuous reduction in the 
hours of labor, coupled with an increase in the earnings per 
hour ; a diminution in the money value of the machinery, — 
that is, in the ratio of capital to production, coupled with 
an increase in its productive efficiency ; a constant increase 
in the supply of cotton fabrics per capita, coupled with a de- 
crease in the price ; a continuous increase in the purchasing 
power of gold dollars in respect to almost all articles of 
necessary subsistence, a few articles only having advanced 
in price, mainly meat and timber. 

In all these points the cotton manufacture is not excep- 
tional, but the same facts can be proved in respect to all 
other branches of industry where the accounts have been 
kept upon a uniform system.' 

After making all necessary corrections in the data respect- 
ing cotton fabrics, on account of the variations in the price 
of raw cotton, it therefore appears that the apparently 
paradoxical propositions which I have submitted — the re- 
verse of those which are commonly accepted — are fully 
sustained. 

First. — The rate of wages paid has not been a true meas- 
ure of the cost of production. 

Second. — The lowest rates of wages have been paid when 
the cost in money was the highest, and the highest rates of 
wages are now paid when the cost in money is lowest. 

Third. — Low wages and cheap labor have not been sy- 
nonymous terms. That labor has, in fact, proved to be 
cheapest by which the largest product for each dollar ex- 

^ See appendix. Graphical statement of two factories. 
' Appendix. — Wages of various kinds compared. 



66 WHAT MAKES 

pended was assured, and that has been the highest paid 
labor. 

Fourth. — The employer has not been under the necessity 
of paying low wages in order to make low-priced goods. 
The goods now made at the rate of $5 to $6 per week being 
sold at less than one half the price, in many instances, of 
those which were formerly made at the rate of $2.50 to $2.62 
per week. Not only is the capital in the cotton-mill now 
less than one half what it was in 1830 even when measured 
in terms of money, in ratio to the value of the product, but 
the average rate of profit which capital now rests satisfied 
with is less than half on each dollar invested what it was in 
1830. Hence the competition of capital with capital has in- 
creased the quantity of cotton cloth at a decreased rate of 
profit. On the other hand, the competition of labor with 
labor has not prevented the continuous rise in the rate of 
wages, and these wages have more than doubled in the pur- 
chasing power of each dollar, by comparison with the cotton 
cloth in the making of which they have been earned. In 
respect to some kinds of cotton cloth, such as printed cali- 
coes, the actual weekly wage of to-day will buy four or five 
times as much as the weekly wage of forty years ago. In 
this branch of industry, at least, all interests have thus been 
harmonious. The increase of wealth in the cotton manu- 
facture has been accompanied by a yet greater increase in 
the welfare of the cotton operative, while both have been 
accompanied by a vastly greater supply of cotton fabrics, 
and by their increased consumption at lower and lower 
prices. 

These data have been compiled from the accounts of cer- 
tain factories which have never become bankrupt — whose 
stock has never been reduced in its par value, and which 
have paid a fair average dividend to their stockholders, 



THE RATE OF WAGES? 6/ 

from time to time, since they were established to the 
present day. I have taken as examples coarse fabrics, the 
common wear of the million. During this period, from 1830 
to 1884, this branch of industry, like all others, has been sub- 
jected to over thirty changes in the tariff ; to the suspension 
of specie payments in 1837 and 1857, brought about by 
purely commercial crises ; to the suspension of specie pay- 
ments at the beginning of the war, brought about by the 
imposition of the Legal-Tender Act ; to a variation in the 
price of cotton from five cents a pound to $1.83 per 
pound ; to the weary depression from 1873 to 1879 » ^^ 
several minor commercial crises. They have also been sub- 
jected to numerous acts of interference on the part of the 
State Legislature in the conduct of their affairs. If con- 
stant vacillation and change in acts of legislation, in respect 
to the tariff, currency, banking, bankruptcy, taxation, hours 
of labor, and other acts which are now deemed of present 
permanent interest to legislators, could have killed these 
establishments, they would have long since been very dead. 
May not this prove that we depend much less upon gov- 
ernments and upon statutes than we think we do ? We are 
almost forced to accept the dogma of Buckle, that the 
greatest service of modern legislators is to repeal the ob- 
structive statutes of their predecessors. 

The same progress and improvement in the condition of 
the operative have occurred in England during the same peri- 
od ; only the change has been greater there than it has 
been here, because the English operatives started from a 
much lower plane and have now nearly attained an equality 
with the condition of our own in many departments. 

We may now recur to the question. What makes the rate 
of wages ? In other words. Why are the average wages ex- 
pressed in terms of money in the same factory nine to ten 



68 WHA T MAKES 

cents an hour to-day, against three and a half to four cents 
an hour forty or fifty years ago, while the rate of interest or 
profit on capital, when invested in the safest possible securi- 
ties, is now only three to four per cent, against six, eight, 
or even ten per cent, then ? 

In order to bring out the point of this argument with yet 
greater clearness, having already compared one period of 
time with another in the same factory, we may now com- 
pare one mode of work in this art with another in the same 
country in two different places, to wit : Let us compare the 
homespun fabric of Western North Carolina with the fac- 
tory cottons of New England. It is computed by men who 
have had much experience, and whose observations are en- 
titled to credence, that there are two or three million persons 
living in the heart of the United States, in the mountain sec- 
tion of the South, who are still clad in homespun fabrics of 
cotton and of wool. I have myself been among them, and 
have examined the conditions of the art of making cotton 
goods as it there exists. Two carders working with hand 
cards, two spinsters operating spinning-wheels, one weaver 
working a hand-loom — five adult persons in all — convert four 
to five pounds of cotton into eight yards of cloth in ten 
hours ; the cloth is heavy, rough, and unsightly, very durable, 
and worth in the neighborhood, when sold, about twenty 
cents a yard. If the value of the cotton be deducted, the 
five persons might possibly earn twenty cents a day, the 
total value of this product being $i.6o. The capital inves- 
ted in the hand machine can hardly be computed, because 
the only thing purchased would have been the two hand- 
cards ; but if the hand labor expended in the construction 
of the spinning-wheels and hand-looms were computed in 
money, the whole investment might come to $ioo. The 
proportion of capital used, in its ratio to the annual product, 



THE RATE OF WAGES? 69 

would therefore be very small, and the ratio of labor, even 
at twenty cents a day, be very large. In New England, 
$5,000 worth of capital, operated by five persons, male and 
female, averaging each one dollar per day in wages, 
will suffice for the conversion of three to five hundred 
pounds of cotton into eight hundred yards of the same kind 
of coarse cotton cloth ; the cloth softer, more sightly, and 
not quite as durable ; when sold as low as even seven or 
eight cents a yard, yielding money enough to pay for the cot- 
ton and other materials, profit enough to pay ten per cent, 
on the capital, and yet leaving as the result for the wages of 
the operatives one dollar a day as their share of the product. 
Between these two extremes every phase of the progress of 
a century in the art of cotton-spinning and weaving can even 
now be observed, in a journey of a week, from Boston to 
North Carolina and back. The small mill, like that of 1828, 
fitted with old, heavy, slow-moving machinery, still exists, 
in which twice or thrice as many Southern operatives, work- 
ing thirteen hours a day, at two thirds the rate of earnings 
made in Lowell, get off a less product of cloth at a far higher 
cost. As we journey back toward the North, the mill be- 
comes larger and more effective, until we arrive at the great 
factories in New England, where the highest wages are 
paid and the lowest cost of production is assured. The same 
or even greater extremes may be found by comparing India 
and China with England; while the cotton-mills of England, 
when compared with the factories of Germany and Italy, al- 
though the machinery may have been made by the same 
makers, yet show the same rule — a larger number of per- 
sons, less effective work, lower rates of wages, and higher 
cost, as we go away from England to Germany, to Austria 
and to Italy. 

It would therefore appear that wages are a remainder 



70 WHA T MAKES 

over from the sale of the product, and are determined by the 
sum of money which that product will bring in the markets 
of the world. From this sum of money must be assigned : 

First. — A portion or sum sufficient to restore the depreci- 
ation of the capital used, — in other words, to keep the 
machinery in effective condition. 

Second. — A sum equal to the average rate of profit on 
capital invested in the very safest securities, and, in addition 
to that rate, as much more as is necessary to compensate 
the owner for the greater risk of one branch of work as com- 
pared with another. 

Third. — The cost of the materials. 

Fourth. — The sum needed to secure the very best ad- 
ministration. 

Fifth. — The proportion of the national, State, and munici- 
pal taxes which are collected from the consumers of the 
goods through the instrumentality of the person , firm, or 
corporation owning the property ; which taxes enter into 
the money-cost of the product and must be recovered from 
the sales. 

Lastly. — The remainder over constitutes the wages or 
earnings of the laborer, whatever that remainder may be. 

Profits, taxes, and wages are therefore alike derived from 
the sale of the joint product of capital and labor. 

Unless one branch of industry yields the average of all 
branches, due regard being given to the greater or less risk 
of each as compared with the other, it will not be under- 
taken ; or, if undertaken, it will not long continue to be pur- 
sued. Wages therefore are apparently deferred to profits ; 
but, on the other hand, wages constitute all that there is left, 
and under the inexorable law of competition of capital with 
capital, the profits of capital are constantly tending to a 
minimum, while the rate and purchasing power of wages 



THE RATE OF WAGES? 7 1 

are both constantly tending to a maximum. Capital is al- 
ways ready to take the risk and to become the guaranty or 
insurance fund for the recovery from sales of goods of higher 
and higher wages for any kind of skilled labor which is 
capable of increasing the product of any given quantity of 
machinery. From the sale of this increased product, in the 
first instance, capital gains. More of the same machinery 
is then added, and, as it becomes greater in quantity and 
more effective in use, the rate of profits diminishes, although 
the aggregate may increase ; in other words, capital secures 
a less and less proportion of the constantly increasing result, 
while labor receives all that there is left over. That is, the 
remainder over is constantly becoming a larger and larger 
proportion of an increasing product. There are of course 
temporary fluctuations ; but both observation and experi- 
ence, combined with statistics, confirm this rule both in this 
country and in England. In other words, the rule laid down 
by Bastiat is sustained by experience; the aggregate profit 
of capital is augmented but the relative profit is diminished 
while the wage of labor is increased both absolutely and 
relatively. 

I had been engaged in this examination and compilation 
before I even knew that Mr. Robert Giffen was engaged in 
the same work. His results and my own, covering a period 
of fifty years, are identical. 

Having thus attempted to answer the general question. 
What makes the general rate of wages? now let us give a 
few moments to the particular question, What makes the 
rate of wages higher in this than in any other country? In 
order to give an intelligent reply to this question, we must 
treat the annual product of the United States as a whole, 
and consider only the general rate of wages in this country. 
In some particular branches of manufacture, or in some 



72 IVHA T MAKES 

hereditary or national arts, other nations may still apply 
machinery more effectively than we do ; and in some special 
branches of agriculture, such as wine, olives, sugar, and the 
like, other countries may either possess better conditions 
or for the time being greater skill. On the whole, however, 
the people of the United States are in the possession of 
more ample and varied natural resources, and of the most 
effective capital in the form of machinery ; they are also 
endowed with greater facility in the adaptation of machinery 
both to agriculture and to manufacturing ; they possess more 
effective mechanical instrumentalities of distribution by 
rail and river ; they enjoy a continental system of unrestricted 
commerce between the States ; they have a fairly complete 
system of common education ; but lastly, they are subjected 
to the least diversion of any part of their annual product to 
purposes of destructive taxation, — that is, to the support 
either of standing armies or of privileged classes. I do not 
recite our advantages in a boastful way but in order merely 
to bring out the salient point, that while other Nations prepare 
for War we prepare for Work. 

Our only great war has been fought in the interest of 
labor — in order that labor might be free. It gave such an 
incentive to invention in the North that all our principal 
crops increased during this period even though a million 
men were taken away from their work. It opened the way 
for the Southern States to such conditions that the South 
itself is to-day richer and more prosperous than in the palmi- 
est days of slavery. 

Our national debt in 1866 was $83 per head of population. 
It is now but $25 per head, and will soon be wholly paid. 

When two simple principles shall have become a part of 
the common knowledge of the people of the United States, 
the end of all standing armies in the civilized nations of 
the world will have come. 



THE RATE OF WAGES f ^ 73 

These two principles are : 

First. — All nations are interdependent, and in all com^ 
merce both parties gain in welfare. 

Second, — In all arts which are not mere handicrafts high 
wages in money are the necessary result of low cost of labor 
of production. 

In the grand competition for the commerce of the world 
which now turns on a cent a bushel, a quarter of a cent a 
yard, or a fraction of a penny on a pound of iron or steel, 
no nation which bears the burden of standing armies like 
those of Germany, France, Italy, Austria, and Russia, can 
hope to enter into successful competition with England or 
the United States, when the whole English-speaking people 
take advantage of their position and. serve the nations of 
the world with goods at low cost, in which all who have 
joined in the work have made higher wages than can be 
earned in any of the countries named. The commerce of 
the army-burthened nations with others will be destroyed 
by its own restrictions. Nations can only be ruined by 
their own burdens; — then what may come? Their own re- 
sources will not suffice to sustain their armies, but with the 
burden of their armies upon them they cannot engage in 
competition with England or America ; their product will 
be small and insufficient ; their wages very low in their 
rate, barely capable of buying enough to sustain life— if 
even for that, — while their cost of production as a whole 
must be very high. 

It is difficult to foresee the course of events. These ar- 
mies are as impossible to be disarmed as they are incapable 
of being sustained, without revolution and destructive war. 
What will be the end no man can tell ! 

In contrast with these adverse and costly conditions, the 
English-speaking people may well rejoice in the relative free- 



74 ^^^A T MAKES 

dom of Great Britain and the absolute freedom of the 
United States. 

In addressing the British Association it may not be un- 
suitable to call attention to the position of the United 
States, provided it is not done in a boastful spirit. In deal- 
ing with the potentialities of the future it is almost impos- 
sible to prevent the imagination from running riot, but since 
the Chairman of our Section, Sir Richard Temple, has 
spread before you in his address the magnificent picture of 
the British Empire, I may perhaps be permitted to dwell 
upon the resources of the United States, and by analogy, 
of Canada also, in a few paragraphs. With respect to 
my own country, I may venture to say that in addition to 
the advantages I have recited our taxes are, on the whole 
constructively expended. The necessary result ensuing 
from our conditions is a larger annual product in ratio to the 
number of persons employed in making it, measured either 
by quantity, or, when brought into competition with the 
world, by price or the sum of money which is received for 
it, than can be elsewhere attained. It is also, as a rule, of 
better quality, because of the more intelligent methods ap- 
plied to its production. If we consider production as a 
whole, our annual product comes into competition for sale, 
with other products of the world of like kind, and its price 
as a whole, is determined, directly or indirectly, by this 
world-wide competition. From this determination of its 
price, its value is converted into terms of money. Quantity 
and quality alike tend to increase the sum of money recov- 
ered from the sale, and this sum of money is the sum which 
is to be divided between capital and labor. Large general 
profits and high general rates of wages are the necessary 
result. 

It is therefore proved to have been absolutely true in 



THE RATE OF WAGES? 75 

this country that, in proportion to the increase of capital, 
the absolute share of the value of the annual product falling 
to capital has been augmented, but its relative share has 
been diminished ; while, on the other hand, the share that 
has fallen to labor has been increased, both absolutely and 
relatively. The generally high rate of wages, expressed in 
terms of money, in the United States, is the necessary con- 
sequence or result of the generally low labor cost of produc- 
tion, — -that is, of the smaller quantity of labor by which the 
production is assured ; which less quantity of labor suf^ces 
because of the application of the most effective machinery, 
i. e., of capital, to the work. 

Let me give two or three salient examples proving this 
rule. Man does not live by bread alone, but bread is the 
staff of life. What people gain their bread with so little 
exertion of human labor as the people of this country? If 
we convert the work done in the direction of machinery 
upon the great bonanza farms of far Dakota into the yearly 
work of a given number of men, we find that the equivalent in 
a fair season, on the best farms, of one man's work for three 
hundred working days in one year is 5,500 bushels of wheat. 
Setting aside an ample quantity for seed, this wheat can be 
moved to Minneapolis, where it is converted into 1,000 bar- 
rels of flour, and the flour is moved to the city of New 
York. By similar processes of conversion of the work of 
milling and barrelling into the labor of one man for a year, 
we find that the work of milling and putting into barrels 
1,000 barrels of flour is the equivalent of a man's work for 
one year. By a computation based upon the trains moving 
on the New York Central Railroad, and the number of men 
engaged in the work, we find that 120 tons, the mean be- 
tween 4,500 bushels of wheat and 1,000 barrels of flour, can 
be moved 1,700 to 2,000 miles under the direction of one 



'j6 WHA T MAKES 

man working eighteen months, equal to one and a half men 
working one year. When this wheat reaches New York 
City, and comes into possession of a great baker, who has 
established the manufacture of bread on a large scale, and 
who sells the best of bread to the working people of New 
York at the lowest possible price, we find that i,ooo barrels 
of flour can be converted into bread and sold over the 
counter by the work of three persons for one year. Let us 
add to the six and a half men already named the work of 
another man six months, or half a man one year, to keep the 
machinery in repair, and our modern miracle is that seven 
men suf^ce to give i,ooo persons all the bread they cus- 
tomarily consume in a year. If to these we add three for 
the work of providing fuel and other materials to the rail- 
road and to the baker, our final result is that ten men work- 
ing one year serve bread to one thousand.^ 

' It may not be assumed from this analysis of the production of wheat upon 
what are known as the great " Bonanza Farms" of the Northwest, that any in- 
ference is to be drawn from these facts either for or against the large holdings 
of land as distinct from small farms or "peasant proprietorship " so called. 

If consideration be given to the kind of crop which is to be raised, it will be 
apparent that a certain proportion of the products of agriculture may rightly be 
raised upon the largest allotments of land to which machinery may be applied 
in the greatest measure, by which method the largest production will be as- 
sured at the least cost. 

Wheat is essentially a crop of this kind. It contains the maximum of nutri- 
ment in the least bulk. It can be moved over long distances at low cost, and it 
is a prime necessity of life. It may, therefore, well be produced in largest 
quantity at the lowest measure of cost, even though this method may for a 
time injure the condition and impair the prosperity of the small farmer who 
cannot adopt machinery in so great a measure, or who has not the capital neces- 
sai7 for extensive cultivation. 

Maize or Indian corn, on the other hand, containing less value in the same 
bulk, may well be raised upon smaller allotments of land nearer the places of con- 
sumption, if it is to be used in the form of meal ; but maize may also be consid- 
ered one of the crops subject to the application of large capital, and to being 
raised in the most economic manner on large farms when it is to be fed to 
cattle or hogs, and thus concentrated into a removable form. 



THE RATE OF WAGES? 77 

Again, iron lies at the foundation of all the arts. At an 
average of 200 pounds per head in the United States, the 
largest consumption of iron of any nation, we yet find that 
the equivalent of one man's work for one year, divided be- 
tween the coal mine, the iron mine, and the iron furnace, 

But although the wheat and corn crop constitutes so large a factor in the 
subsistence of the people, there are yet very many other products of agriculture 
which can only be raised in part by hand labor or with less application of 
machinery, and upon small farms more economically than they can be upon large 
ones. Hence it follows that in districts like the central part of the State of New 
York, which was formerly the great centre of wheat production of the United 
States, as soon as the competition in the sale of grain of the great Western farms 
began to be severe, the land being under no restriction either of lease or settle- 
ment or other artificial condition, was immediately converted to other crops, 
such as fruit and vegetables, which will bear transporlation over short distances 
only, or of seeds and the like ; while the land in closer neighborhood to the 
great cities, which under former conditions and in the absence of cheap trans- 
portation was of necessity devoted to the coarser or more staple crops, is now 
devoted to mafket gardening. 

Thus it has happened that while the large farmers prosper the small farmers 
prosper yet more, not being under the necessity of applying themselves to a few 
coarser staples, but adapting their land to any demand which may happen to 
exist in their immediate neighborhoods. 

The production of wheat in the central part of New York is about as large as 
it ever was when it was the great wheat centre of the country, yet it is now a 
very insignificant factor in wheat production, and the farmers in this section 
have attained vastly greater prosperity by diversity in their production, and by 
the application of improved tools combined with hand labor, than they ever 
obtained under the former method. 

The secret of success in agriculture, as in many other matters, therefore, lies 
in the freedom of the land from the artificial restrictions of leases, settlements, 
and the like — by which English land is now so much encumbered, and the 
reason why the agriculture of the Eastern and Middle States has advanced in 
method and prosperity in the face of Western competition, is to be found in the 
absolute freedom in the purchase, sale, and use of land, which is the rule in this 
country. Land is itself a tool or instrumentality, and under our laws and customs 
the tools ultimately fall to him who can use them best ; or it may be considered 
as a laboratory rather than a mine, in which the product is in ratio to the intel- 
ligence which is applied to its use. 



78 WHA T MAKES 

suffices for the supply of 500 persons. One operator in 
the cotton factory makes cloth for 250, in the woollen fac- 
tory for 300 ; one modern cobbler (who is any thing but a 
cobbler), working in a boot and shoe factory, furnishes 1,000 
men, or more than 1,000 women, with all the boots and shoes 
they require in a year. So it goes on ; and the more effec- 
tive the capital, the higher the wages, the lower the cost, 
the more ample the supply. 

But in the consideration of this or any other theory of 
wages, it must always be remembered that these natural 
laws which govern the actions of men in the conduct of 
the processes of industry, work very slowly, and are sub- 
ject to variable causes or interruptions which may suspend, 
retard, or even reverse their normal action for a considera- 
ble period. For instance, the process of making iron, be- 
ginning with the mining of the coal and of the ore and end- 
ing with the conversion of the materials in the furnace, calls 
for the use of a very large capital, and for the highest 
scientific attainments in the heads of departments and in 
the administration of the work. It also requires special 
skill on the part of a small portion of the workmen, but the 
larger part of the work is not of the kind that calls for any 
great measure of intelligence, and is, in fact, mainly hand- 
work. It might therefore happen that the country which 
first engaged in this branch of industry on a large scale 
would obtain a paramount control of all markets and might 
be able, for a long period, to prevent the building up of com- 
petitive works elsewhere. In fact, so long as the only fuel 
with which iron was smelted was charcoal, the colonies of 
America were able to supply themselves, and even to ex- 
port large quantities of iron to Great Britian. But when a 
method was invented for the application of coal to the 
smelting of iron, the supremacy of Great Britain in this 



THE RATE OF WAGES? 79 

art was assured for a long period. A dense population 
gathered round her mines, skilful enough for this work, but 
otherwise unintelligent, uninstructed, and irremovable, or 
practically incapable of meeting the conditions necessary for 
beginning this work in other countries. Under such condi- 
tions as these, the British employers of labor in making iron 
were in a position which enabled them to keep wages down, 
and to keep prices and profits up for a long period, as in 
fact they did. Under such relative conditions the competi- 
tion with all other countries, especially a country like the 
United States where population was very sparse and capital 
was very limited, was of necessity long delayed, even though 
our deposits of iron and coal are so placed as to be more 
easily worked. And even though a ton of iron made in the 
United States now represents a much less quantity, or less 
number of days of labor, than a ton of iron produced in 
Great Britain, it was not always so. It therefore became a 
mere question of expediency whether or not to interpose a 
temporary protective duty in order to overcome certain 
artificial conditions. It was held that a country should 
render itself substantially independent of all other coun- 
tries in the making of iron, because iron is one of the essen- 
tial articles of war. These arguments were entitled to all 
the consideration which they may deserve. No opinion 
need here be expressed upon them. 

The same retardation in the working of natural laws also 
occurred in respect to the inventions of Arkwright and 
others in cotton-spinning. England succeeded for a long 
time in retaining control of these inventions, which were of 
prime importance, by making it a penal offence to carry 
drawings or models to any other country. By this joint 
control of the processes of making iron and the application 
of machinery to the cotton manufacture, England obtained 



8o IVI/J T MAKES 

the supreme control for a time of this latter art, and fairly 
succeeded in preventing these modes of work from being 
carried to this or any other country for very many years. 
The cotton manufacture was not established in this country 
until Samuel Slater succeeded in building machinery from 
memory, having been unable to bring plans from Eng- 
land ; of course such an undertaking was at a great 
disadvantage. In this case, again, the main question as to 
the development of textile establishments by means of a 
protective duty became one of expediency only. The 
expediency of these protective duties was sustained upon 
the ground that although the people were for the time 
subjected to the necessity of paying higher prices for their 
iron and for their textile fabrics than they would otherwise 
have paid, an ultimate reduction of cost and of price to a 
much lower plane was thereby assured, and has doubtless 
been accomplished. 

These two examples are cited in order to show that this 
theory of wages does not of necessity carry with it the 
laisser faire idea of legislation. It is not denied that special 
branches of industry may be promoted by legislation of this 
sort. It is not denied that wages in that special branch 
may be temporarily raised, because by means of the ob- 
struction to foreign import which the duty interposes, the 
price of the domestic fabric is for a time maintained at a 
higher point than it would otherwise be ; and since the sum 
from which wages and profits are alike derived is the value 
of the joint product, it follows that, in these particular arts, 
so long as the protective duty serves to keep up the price, 
there may be more money to be divided in rates of wages 
to the operatives who do this special work. 

But, it will be observed that such additional profit or ad- 
ditional wage is at the cost of the consumer in the same 



THE RATE OF WAGES? 8 1 

country, and that there can be no material effect upon the 
general rate of wages because the number of persons now en- 
gaged in any branch of industry which could be subjected 
to foreign competition is very small in ratio to the whole 
number of persons engaged in gainful occupation. Such 
duties may be expedient or not. That is not the question 
at issue in this treatise. I cite these cases in order that the 
true theory of wages may not be prejudiced in the mind of 
any one by any apparent antagonism to the protective 
theory, which may be justified on entirely independent 
grounds. 

In the judgment of the writer the source of wages and 
the law by which they are determined fail to be com- 
prehended, both by the advocates of protection and free 
trade, and this failure leads to much useless and bitter con- 
tention. If the honest advocate of protection were once 
convinced that when an industry had become fairly estab- 
lished the rate of wages determines itself according to the 
general average of wages in other work of analogous kind, 
and that the wages thereafter tend to the share of the la- 
borer becoming greater and greater, he would be less 
averse to considering the date when the protective duty 
could either be reduced or removed.: No one but the most 
confirmed doctrinaire can deny that the argument in respect 
to wages and to their maintenance which is presented on 
behalf of a protective tariff, is conscientiously presented in 
the interest of labor on behalf of those who adhere to it. 

On the other hand, if the equally sincere advocate of free 
trade could once be convinced that the continued imposi- 
tion of the duty does not of necessity involve the continued 
taxation of the many for the benefit of the few ; if he could 
admit that it might even be expedient, under certain cir- 
cumstances, for the State to grant a special privilege to 



82 WHA T MAKES 

some special branch of work for a certain period of time, 
much foolish talk, bitter contention, and absurd misrepre- 
sentation would be avoided. 

The tariff question, the protection of women and children 
in factories from overwork or from injury, and other like 
subjects of legislation, are questions of expediency, varying 
with the time and circumstances of each country. They 
are not like slavery or inconvertible paper money, moral 
questions, upon which no compromise can be tolerated ; but, 
on the contrary, they are subjects for reasonable considera- 
tion and for reasonable compromise among honest and fair- 
minded men. When the whole direction of domestic in- 
dustry has been in some measure altered by the continued 
imposition of high duties upon foreign imports which were 
the necessity of war, nothing could be more injudicious than 
to adopt revolutionary changes. It may have been bad policy 
to impose the high duties, but it does not follow that it would 
be good policy to remove them all at once, or that he is a 
spoliator who asks time to adjust his capital and the labor 
which he employs to other conditions. 

I have recited the various changes which have affected a 
single textile art. Periods of prosperity and adversity af- 
fect all commercial and manufacturing countries alike. They 
are more intense in one country than another ; sometimes 
most intense in a country which, like Great Britain, depends 
upon the widest foreign commerce, sometimes in a country 
which, like the United States, depends mainly upon domestic 
commerce. Statutes in regard to the collection of revenue, 
the hours of labor, and the like, may make these fluctuations 
a little more, perhaps a little less intense, but in the long run 
they have and can have no permanent effect. Competition 
adjusts itself to all conditions, and, in the long run, wages 
or earnings will be the highest in that country in which 



THE RATE OF WAGES? 83 

capital and labor cooperate to the fullest extent, thereby as- 
suring the largest production at the lowest labor cost. 

The progress of the United States has been uniformly 
onward, despite all the vacillations and changes in her finan- 
cial policy. Our greatest dangers and most serious disasters 
have arisen from bad money rather than from bad methods 
of taxation. The danger now,before us, growing out of the 
continued coinage of a silver dollar of light weight, is per- 
haps the most serious one. Next to that comes the danger 
growing out of the enormous excess of our national revenue ; 
but even this enormous excess of revenue will itself force 
upon us a change in our method of taxation. In that again 
comes a danger, because next to the evil which may be in- 
flicted upon a country by the imposition of heavy taxes, is 
the evil which may come from an injudicious method in re- 
moving them after the industry of the country has adjusted 
itself to them. 

I have endeavored to separate the fundamental principle 
of wages from all such side issues, and to prove, with as 
much scientific accuracy as may be possible, that the inter- 
ests of the employer and the employed are absolutely 
identical, and that progress and poverty are not of necessity 
evolved together under the existing customs of the English- 
speaking people. I have referred to the admirable address 
of Mr. Robert Giffen, proving a similar progress to that of 
this country in Great Britain, and from similar data. I had 
not read that treatise until after the substance of this essay 
had been compiled. 

Let me refer finally and but a moment to one great cause 
of disturbance in the relations of men to each other. The 
inventor, the man of science, is the great disturber of exist- 
ing conditions. He renders worthless great masses of cap- 
ital which had been valuable ; he takes away the hereditary 



84 WffA T MAKES 

occupation of vast numbers of laborers who may be capable 
of doing no other kind of work. In the process of adjust- 
ment to these newconditions many hardships arise, but the 
end is progress, both in wealth and in the alleviation of 
poverty. The only accumulation which has any permanent 
value consists in that experience and versatility, in that 
habit and capacity of applying brains and hand alike to any 
kind of work which is waiting to be done, whereby men are 
enabled to prosper under any and all conditions. The only 
capital of any importance, which can be transmitted from 
one generation to another is this power of applying brain and 
hand together to useful work, whatever may be the chang- 
ing conditions under which the work of each generation 
must be done. 

Poverty may for a time ensue, as the consequence of in- 
vention and the consequent displacement of labor; but it 
will be observed that this poverty does not ensue either froni 
the accumulation of capital or from the private ownership of 
land, so much as it does from the destruction of capital and 
in taking away the value from land. 

The jenny and the mule destroyed the spinning-wheel ; 
the power-loom destroyed the hand-loom ; the railroad is 
destroying the canal ; the railroad is reducing the value of 
land in one place and increasing it in another. The discov- 
ery of coal oil would have destroyed the candle market, 
were it not that a demand for the altars of the Catholics 
continued to sustain a few candle works. The gas engine 
is destroying the small stationary steam-engine in England, 
and will soon do so here. Sir Henry Bessemer has taken from 
the English landowner all power to collect any rent from 
land devoted to wheat. With each of these changes 
the few suffer for a time, but the many gain in welfare. 
Witji each of these changes the proportion of capital nece?- 



THE RATE OF WAGES? - 85 

sary to a given production is decreased ; great fortunes are 
lost, unless the owners of such fortunes can adapt their ma- 
chinery to all the changing conditions ; but while some 
fortunes are thus destroyed, others are gained. At the 
present time, or we may say for the last three years, half the 
iron works in the United States have been out of blast, and 
many will never come into blast again ; but during the 
same three years the production and consumption of iron 
has been greater than in any other three years since the con- 
tinent was settled. True prosperity may be guaged by the 
consumption of iron in all the arts of life, about as surely as by 
any statistical method. The loss of fortune to a few produc- 
ers of iron is of no consequence except to themselves, if more 
iron be provided for consumption. Most of these changes 
come gradually ; some of them come suddenly. What are 
called hard times induce the grestest progress. The great 
crops in this country increased every year during the war, 
such was the incentive to invention, which became almost 
compulsory in consequence of the withdrawal of a million 
men from productive industry. 

I have compared the cotton-mill of 1830 with that of 
1883, in the same mill-yard ; but there is little left of the 
factory, either mill or machinery, of 1830; and if there were 
it would be almost useless. The saving in the cost of mov- 
ing merchandise over existing railroads, comparing one year 
with the next preceding, that is, over the railroads existing in 
each year, has far more than equalled the cost of building all 
the new railroads constructed in the subseqent year for 
fifteen years, from 1865 to 1880. In other words, the reduc- 
tion in the charge on existing railroads each year, computed 
on the quantity of merchandise moved in that year, has 
amounted to a sum equal to the sum expended in the ex- 
tension of railroads in the next year, for each and every 
year since 1865. — 



86 IF/IA T MAKES 

We have been treating only a question of material wel- 
fare : What makes the rate of wages ? One answer at least 
we may surely give. When head and hand are rightly 
trained together so that a man can do the work which is 
always waiting to be done, whatever the rate of wages may 
be, it will suf^ce for the purchase of good subsistence. He 
who combines the greatest skill of head and hand in useful 
work will make that exact progress in the accumulation of 
wealth which will be the just measure of the services which 
he renders to his fellow-men. In the last analysis the rate 
of wages rests wholly on character and capacity and under 
such conditions, the advancement of science is but another 
name for progress in human welfare. 

I am well aware that there is nothing original in the 
statement of the fact that the application of machinery to 
production has a tendency to increase the wages of the 
workman, and at the same time increase the purchasing 
power of the money in which wages are paid. This is a 
truism, but how seldom is it comprehended ! Apparently 
never, in the ordinary discussions. Neither employer nor em- 
ploye can regulate the rate of wages which is to be paid in 
money, by any bargain or agreement covering a long period. 
If one employer agrees to pay a higher rate than his com- 
petitors, it will only be a question of time when his business 
will become unprofitable and he must become bankrupt, un- 
less he uses more effective machinery, and thus assures a 
larger product from a less number of laborers. If any con- 
siderable number of employers secure the work of laborers 
at a less rate of wages than others in the same kind of oc- 
cupation, unless there is some compensating advantage to 
the workman in their special establishments, the mere fact 
that the laborer is willing to work at such less rate proves 
him to be incapable or inefficient, and therefore his work 
will be of high cost. 



THE RATE OF WAGES? 8/ 

I have attempted to demonstrate that in all productive 
employment the rate of wages which can be paid in money- 
must depend on the sum of money which is received from 
the sale of the product. Inasmuch as those who work for 
wages in strictly productive occupations constitute by far 
the largest portion of wage receivers, the rates of wages 
for personal services, which are only indirectly productive, 
are gauged by the same standard. All profits and wages 
must come out of the gross product. Furthermore, all 
profits, wages, earnings, or other income, must be substan- 
tially derived from each year's product, because the year 
corresponds to the series of seasons in which one crop is 
made. A part of the product of each year is carried over 
to start the work of the next year upon ; but a part of 
the product of the present year was brought over from the 
previous year to start the work of this upon. Therefore the 
measure of what there is to be divided by the measure of 
money must, in the long run, depend upon what each year's 
product will bring in money. If, then, the annual product 
is large, because the resources are great, because capital is 
ample, because labor is effective, because the army is but a 
border police, — then the sum of money derived from the 
sale will also be large, for the reason that in spite of all 
natural obstructions between one nation and another, the 
product of one nation, as a whole, comes directly or in- 
directly, into competition with the product of the world. 

If the propositions submitted in this treatise can be 
sustained — to wit : that wages are a constantly increasing 
remainder over after lessening rates of profit have been set 
aside from an increasing product, it follows that the ability 
of a very productive country to find a market for its excess, 
especially of farm products, is a most important factor in 
determining the price of the whole product, and therefore 



88 tVHA T MAKES 

in determining the general or average rate of wages and 
profits which can be recovered from the sale of the whole. 
Hence arises the importance of our foreign export of the 
products of agriculture. Even though the quantity ex- 
ported be but a tithe of the whole, yet the sale of this part 
determines the price of the whole, and it therefore becomes 
a prime factor in the general rate of wages. 

If this latter statement be questioned, it will only need a 
moment's consideration to determine it. If the surplus or 
over-production for domestic use, of our oil, grain, cotton, 
meat, cheese, butter, lard, etc., could not be sold in or ex- 
changed for the products of other countries, what should 
we do with it? We could not now consume it ourselves; 
we could not move people from other countries here in 
sufficient number to consume it in any one year. We can- 
not establish manufactures more rapidly because goods are 
already in excess. We must exchange our excess for tea, 
coffee; sugar, hides, wool, and the like, and in the process 
of this exchange the price of all our crops is determined 
by what this excess will bring ; the remainder over from 
these sales establishes the standard of farm wages, by, or in 
comparison with which, all other wages are in the main de- 
termined. Hence the average rate of domestic wages rests in 
a very great degree, under our present conditions, on our 
finding a foreign market for the excess of our products of 
agriculture ; if this market is limited or reduced, the pur- 
chasing power of our farmers, numbering one half our 
population, is reduced, and this re-acts on the demand for 
domestic manufactures. Thus it is, that directly or indi- 
rectly the value of our total production is determined by a 
world-wide competition. What would be the effect of the 
competition of the laborers who now engage in the produc- 
tion of that which we export if they were forced into other 
work for domestic use only? 



THE RATE OF WAGES? 89 

The number of persons engaged in each specific crop is 
not given separately in the census, and can only be inferred 
by deducing relative numbers from the proportion which 
the value of each crop bears to the value of the whole. The 
total number of farmers and farm laborers listed in the 
census was 7,670,493. On the bases of relative values, about 
two and a half per cent., or less than 200,000, were employed 
in the production of sugar, wool, swamp-rice, hemp, barley, 
and a few other articles which may be in part imported from 
foreign countries. 

On the other hand, on the maximum estimate of the 
total value of all the products of agriculture or of the pas- 
ture, over seventeen and a half per cent, was the declared 
value of the export of farm products. From which it may 
be inferred that over 1,300,000 farmers and farm laborers 
were employed in meeting this foreign demand. 

May it not therefore be said that all commerce, both 
domestic and foreign, is a process of liquidation, by means 
of which the respective shares of capital and labor are deter- 
mined, each becoming a larger share of a larger sum recovered 
from such sales, the wider the exchange of product for pro- 
duct, and the greater the service which each renders the 
other, whether capitalist or laborer. 

Finally, the rate of wages, measured in terms of money, 
can only be determined by dividing this remainder over, 
after capital has received its compensation, among the 
laborers who do the work ; the respective share of each 
laborer is then rated only by his or her individual skill, 
industry, and integrity. In the end character and capacity 
determine the relative rates of wages of those who do the 
work. 

I may conclude by again referring to the proposition of 
Frederick Bastiat, which is the motto of this essay : All 



go THE RATE OF WAGES. 

interests are harmonious, " In proportion to the increase 
of capital the absolute share (of the product) falling to 
capital is augmented, but the relative share is diminished, 
while the share of the laborer is increased both absolutely 
and relatively." 



APPENDIX I. 



This appendix will be very uninteresting except to students. A 
summary of its contents may, therefore, be given for the benefit 
of readers who do not care to go over its dry details, as follows : 

Approximate estimate of the value of annual product of 

the census year ........ $10,000,000,000 

Domestic farm consumption estimated .... 1,000,000,000 



Commercial product ..... g, 000,000,000 

Estimated profits of capitalists . $450,000,000 

Estimated savings of other classes . 450,000,000 900,000,000 



Wages fund 8,100,000,000 

Number of persons engaged in all gain- 
ful occupations in round figures . 17,400,000 

Deduct soldiers, marines, and persons 
engaged in subordinate positions in 
the Government service . . . 100,000 



Remainder . . . 17,300,000 
Administrative force i. e., mental rather than manual work 1,100,000 

Working force, i. e., wage-earners or small farrhers . . 16,200,000 

Average remuneration of the administrative force, per year $1,000 

Average wages or earnings of the working force, per year , $432 

Gross amount of national. State, and municipal taxes in 

census year over ........ $700,000,000 

or eight per cent, of the commercial product. 

Each worker is one of a group of 2.90 persons ; therefore each 
average person in a workman's family must find shelter, sub- 
sistence, clothing, and pay taxes out of what forty to forty-five 
cents a day will buy. 

Each five cents' worth added to each person's share, or each 
fifteen cents added to each workman's wages per day, implies, 
at the present time (i884)an additional product and sale of 
commodities worth one thousand million dollars a year, which is 

9* 



92 WHAT MAKES 

about the present value of our wheat product, of our pig-iron 
product, and of all our textile fabrics of cotton, wool, and silk 
combined. 

In the text of this treatise I have presented certain estimates of 
the value of the annual product of the United States in the cen- 
sus year ; also estimates of the gross amount of the profits of 
capital ; and, finally, estimates of the gross amount of wages, 
which, divided by the number of persons engaged in all occupa- 
tions, yielded certain rates. The treatment of this subject in 
extenso belongs more to the science of statistics than to the science 
of political economy. For very many years this branch of Avork 
has been a subject of very great interest to me, and many years 
since I analyzed the returns of the Massachusetts census of 
1875, which census remains to this day a model of accuracy of 
its kind. 

Upon the basis of the facts developed in that census, I have 
endeavored to continue the treatment of the subject, and to con- 
sider the larger figures of the census of the United States. In 
all such undertakings, he who accepts the actual figures, without 
change or alteration, will be sure to be misled. I concur fully 
with the opinion of other special census experts with whom I 
have consulted, as to the qualifications which are necessary to be 
made in making use of many of the tables of the United States 
census. I cannot give these qualifications in better words than 
in those of Mr. Joseph D. Weeks, the special expert who investi- 
gated the general subject of wages in the manufacturing industries. 
His views are as follows.: " The census year was in many indus- 
tries a year of remarkable prosperity. The number of persons 
employed in certain industries at the close of that year was very 
much in excess of the number of persons employed at the begin- 
ning. In most instances the census gave, not the average num- 
ber of persons employed in a given establishment during the 
year, but the number of persons employed at the close of the 
year. Now it will be manifestly unjust to divide the amount of 



THE RATE OF WAGES? 93 

wages received in that industry for the whole year by the number 
of persons employed at the close of the year, and say that was the 
average earnings of the workmen engaged in that industry. The 
wages are for the whole year, and the number of employes very 
much in excess of the average for the year. We have also found, 
as the result of experience, that when workmen do not secure 
work in their own occupation, they go into others, working in 
many cases for themselves. For example, our coal miners on the 
Monongahela River have worked on the average only eight or 
nine months in the year. The idle time is generally in the sum- 
mer. Many of them own little farms, and during the slack season 
for coal mining they are engaged in working their farms ; while 
others, not having farms, seek employment with the farmers of 
the neighborhood." 

In the census figures which I shall adduce, in sustaining the 
averages of earnings which I have reached by other and very dif- 
ferent methods, this qualification will be applied according to my 
own judgment, or in accordance with the information which I 
have received from other special experts ; and I think all who 
are accustomed to make judicious use of statistics will concur in 
the opinion that approximate accuracy has at least been attained. 

For instance, in the production of a little less than 4,000,000 
tons of pig-iron in the census year, according to the figures given 
by Mr. Jas. M. Swank- and Prof. R. Pumpelly, two of the most 
competent special experts, the number of men and boys employed 
was as follows : 

In coal mines producing that part of the coal which was 

used in iron furnaces, about ..... 20,000 

In iron mines ........ 31,668 

In blast furnaces . . . . . . . . 41,875 



Total 93,543 

The sum of the wages of this force was $28,458,822 or $305 

each, on the average. This appears to be an excessively low rate. 

But there is little doubt that this payment covered the work of 



94 WHAT MAKES 

substantially nine months only, and in order to reach a true 
statement of the average wages in the production of pig iron in the 
census year, we must add about one third, thus giving an average 
in all the several departments of the work of $400 per year, 
again sustaining my computation of the general average, which is 
given hereafter at $400 nett for each person employed in any 
kind of gainful occupation. 

I have assumed in the body of the treatise that $520 repre- 
sents, on the average, the full measure of all that is produced by 
each person engaged in gainful occupation in the United States, 
and which comes into the market for sale or exchange. I have 
also assumed that ten per cent, of all that is produced may be set 
aside, in a normal year, for the maintenance and for the increase 
of capital, but the larger part of this profit is enjoyed by but a 
small portion of those who do the work. The greater part of 
the wage-earners save but little. I have assumed an estimate 
of the value of the annual product as $10,000,000,000. I have 
set aside one tenth part for the domestic consumption of 
farmers and their families. In the list of the occupations 
of the people of the United States, which is probably one of 
the most accurate of the enumerations, a little less than one 
half of the number of males employed in any gainful occupa- 
tion are listed as farmers and farm laborers, numbering 7,670,- 
493 persons out of a total of 17,392,099, but as those who 
are engaged in agriculture are mostly men, this force prob- 
ably sustained at least one half the population, or 25,000,000 per- 
sons. The estimate of $1,000,000,000, as the domestic consump- 
tion of this half of the population, therefore assigns $40 a year 
to each agricultural person as the value of the product consumed 
upon the farm, which is not included in any commercial or census 
estimate of the value of the annual product. The remainder of 
the annual product is $9,000,000,000 in value by my estimate, 
which would constitute the annual value of the commercial pro- 
duct, or that part of the product which is bought and sold. 

The next question is, What part of this remainder accrues to 



THE RATE OF WAGES? 95 

capitalists or to owners of land, in the form of profits, Interest, or 
rent ? I have set aside five per cent, upon the annual product 
which comes into the market, — that is to say, $450,000,000 as the 
possible share of capitalists. The remainder of the commercial 
product is $8,550,000,000. I now set aside five per cent, more 
upon the commercial product, to represent the profits of business 
and the savings of working people, $450,000,000. Again we have 
a remainder of $8,100,000,000, which is subject to division in the 
way of salaries, wages, or the earnings of small farmers. 

Before we compute the sub-division of this remainder, it will 
be necessary to devote a few paragraphs to national wealth, and 
to the national profits or savings which are possible ; that is, to 
the increase of the national capital. 

I feel less assurance in respect to the estimate of that part of 
the annual product of the United States which can be set aside 
for the maintenance and increase of capital than in respect to the 
general estimate of the portion which goes to those who do the 
work. I have estimated the savings or addition to capital at 
$900,000,000 in the census year. 

It will be observed that the measure of the savings of the nation 
is something quite different from the measure of that which 
would constitute the profits of individuals ; for instance, the 
manufacturer or merchant may make a very considerable profit 
out of his work, but he then distributes a very large portion of 
this profit in his family expenses, thereby sustaining a large 
number of persons who are included among the so-called work- 
ing classes or wage earners. 

The final end or contribution to the capital of the nation is 
therefore a very much less sum than the apparent profit which 
accrues either from the rent of real estate or from the income 
derived by the individual owners of manufacturing, railroads, or 
other investments, or from business. 

There are very few data available to an individual student 
whereby even an approximate estimate of the net savings of the 
nation can be determined. 



96 WHA T MAKES 

My deduction from many methods of analysis is that the 
normal proportion which can be set aside for the maintenance or 
increase of the capital of the nation can not exceed ten per cent, 
of its annual production, and is probably less. 

It would perhaps be useless to give examples of the various 
methods by which I have attempted to determine this point : one 
will suffice. 

The officials of the Census Department have made a very care- 
ful investigation in respect to the total amount of property 
assessed for taxes in the United States, and have extended this 
sum so as to cover the absolute wealth of the country. The total 
valuation made by the local assessors for purposes of local taxa- 
tion was as follows, for the year of which a return was made in 
the census of 1880 : 

Value of real estate $13,036,766,925 

Value of personal festate 3,866,226,618 

Total $16,902,993,543 

which sum divided by the population gives $337 per capita, but 
the valuation for purposes of assessment varies greatly in different 
States, and a very large proportion of actual property is either 
exempted — such as a large part of the railway system — or else it 
escapes taxation. 

The census valuation of the actual or absolute wealth of the 
United States is as follows : 

IN MILLIONS. 

Farms $10,197 

Residence and business real estate, including water-power . .• 9,881 

Railroads and equipment ........ 5-536 

Telegraphs, shipping, and canals ....... 419 

Live stock, whether on or off farms, and farming tools and machinery, 2,406 
Household furniture, paintings, books, clothing, jewelry, household 

supplies of food, fuel, etc. . . . . . . . . 5>ooo 

Mines (including petroleum wells) and quarries, together with one 
half the annual product reckoned as the average supply in the hands 

of the producers or dealers ........ 78 1 

Three quarters of the annual product of agriculture and manufactures, 
and of the annual importation of foreign goods, assumed to be the 

average supply in the hands of the producers and dealers . . 6, 160 



THE RATE OF WAGES? gf 

Chtlfclies, schools, asylums, public buildings of all kinds, and other 

real estate exempt from taxation ....... 2,000 

Specie ............ 612 

Miscellaneous items, including tools of mechanics . . • . • 650 



Total ($43,642,000,000) . $43,642 

It will be observed that in this estimate of wealth the value of 
land is included. 

It is computed that four fifths of the valuation of the farms 
consists of the land, and from one half to two thirds of the es- 
timate of the residence or business real estate also consists in the 
value of land. 

It will also be observed that the estimate includes household 
furniture, paintings, books, household supplies and the like, as 
well as churches, schools, asylums, and public buildings, and that 
the estimate of the value of railroads is taken at the normal 
amount of stock and bonds issued, the true cost and real value 
being much less. 

If we separate from this estimate that part of the valuation 
which consists in the mere value of land, and also setting aside 
churches, asylums, and the like, which represent wealth con- 
sumed rather than reproductive capital in the ordinary use of 
that term, the total amount would be reduced to at most twenty- 
five thousand millions, and perhaps to a less sum, and this would 
represent the actual capital or labor saved for purposes of repro- 
duction during the whole period of the existence of the States 
and colonies of America, thereby sustaining the commonly ac- 
cepted proposition, that the value of the actual capital of the 
richest state or nation can bear a ratio to the value of its annual 
production of only two to threefold. 

The invaluable part of the capital of a nation is that portion 
which has become a part of the common wealth, for the use of 
which no price can be charged, — such as the opening of the com- 
mon ways, the removal of obstructions to the navigation of water- 
ways, the clearing of arable land, and other results of labor of 
the same kind ; but yet more potent in reproductive enterprise is 



98 



WHAT MAKES 



the immaterial capital which ensues from our increasing command 
over the forces of nature, and our power of directing them to the 
service of man. 

It is admitted by all statisticians of repute that all valuations 
of national wealth which are made in terms of money, like the 
foregoing, must be used with great caution, and are very liable to 
mislead, especially when made use of to compare one period with 
another. 

Such comparisons, when honestly made, are rather an indica- 
tion of ignorance or incompetence in the use of statistics, than 
of any thing else. 

For instance, witness the census data : 



over assessed value 



In i860 the assessed value of all the property of the U. S. was 

given as being . 
True valuation, estimate 
Excess of so-called true valuation 
In 1870 the assessed value was 
True valuation, estimate . 
Excess of so called true valuation 
In 1880 the assessed value was 
True valuation, estimated 
Excess of so-called true valuation 



$12,084,560,005 

16,159,616,068 

34 per cent. 

14,178,986,732 

30,068,518,507 

112 per cent. 

16,902,993,543 

43,642,000,000 

158 per cent. 



It is perfectly well known that a great deal of attention was 
given to the attempt to ascertain the true valuation of 1880, and 
very little in i860 ; while the figures of 1870 are vitiated and 
rendered almost worthless by the depreciation of the currency at 
that date. 

Hence, any one who should attempt to picture the progress of 
the nation by a statement that we have gained thirty thousand 
million dollars (I) in wealth in twenty years, or fifteen hundred 
million dollars (!) a year, would be obliged to defend the honesty 
of his purpose by an admission of his utter ignorance of the sub- 
ject. 

In the first place, the statements are wholly misleading, because 
the value of land is included, and therefore the increase in its 
value forms an element in the case. ^- 



- THE RATE OF V/AGES? 99 

Second, unless such increase in the valuation of land, and of 
capital placed upon the land, has been accompanied by a greater 
proportionate increase in the annual product of both, out of 
which the people may be subsisted — then an increase of wealth 
on the part of the few who own the land would only be evidence 
of an increase of want on the part of the many who consume its 
products. 

Third, because the data of i860 were absolutely incomplete 
and almost worthless. 

Such estimates and comparisons of wealth have their use, but 
their use is only or mainly in their connection with annual pro- 
duction and distribution. It is doubtless true that this country 
has made greater progress during the last twenty years, both in 
wealth and in productive capacity, than ever before. The rea- 
sons are plain — three of the principal causes may be cited ; 

1. The abolition of slavery. 

2. The application of machinery to agriculture. 

3. The extension and unification or consolidation of the railway 
system. 

It may possibly be true that one half the apparent difference in 
wealth between i860 and 1880 represents an actual addition to 
the productive capital of the country. One half would be $1,500,- 
000,000, or $750,000,000 per year. During this period the average 
population of the country has been 40,000,000 persons, and there- 
fore such a gain would be at the rate of $18.75 to each person in 
each year. 

When viewed in this aspect, the statement in hundreds of mil- 
lions is reduced to terms of easy comprehension, and the result 
indicates the very slow rate at which capital can be accumulated 
and maintained, rather than the reverse. It must also be remem- 
bered that whatever the gain in wealth may be, it is enjoyed by a 
very small portion of the population. 

On the other hand, the taxes which have been imposed during 
this period have been little below $18.75 P^r head, if we take 
into view only the actual assessed taxes during and since the 

LOFC 



TOO WHAT MAKES 

war. In the census year, the aggregate of national, State, and 
municipal taxation was over ^700,000,000, or over ^14 per cap- 
ita, and if the war taxes be computed in their ratio to the popu- 
lation of that date, the sum of all the taxes imposed upon the 
people of this country since i860 has without question been equal 
to at least eighty per cent, of the whole sum which has been 
added to our productive capital during the same period. 

In this light the importance of a correct estimate of the value 
of our annual product, of the possible profit thereon, the 
method of its distribution, and the incidence of taxation, become 
apparent. I have made use of the census estimates of national 
wealth only for the purpose of rendering the importance of this 
latter investigation more apparent, and not because I attach much 
value to statements of accumulated wealth when measured in 
terms of money. 

In pursuance of the main subject, it appears that the sum of 
national taxes which have been imposed by the Government of 
the United States upon the people during the last twenty years 
has been over ^7,200,000,000. 

The amount of State, county, and municipal taxes for the year 
reported in the census was over $300,000,000, or $6 per capita. 
This is at a less rate than for a few years preceding, and at a less 
rate than was imposed during the war and the years immediately 
subsequent thereto. If this rate of $6 per capita be applied to 
the average population for twenty years, the gross amount of 
such taxes has been not less than $4,800,000,000. The total 
amount of taxes, therefore, including national. State, county, and 
municipal, in twenty years, has been $12,000,000,000, or at the 
rate of $600,000,000 per year. 

This sum bears the ratio, for the whole period, of eighty per 
cent, to the sum which I have computed as the true addition to 
the capital of the nation during twenty years, yet, in spite of this 
burthen, we have prospered, and have gained in general welfare 
as well as in national wealth. 

At the risk of wearying the reader by repetition let me state 



THE RATE OF WAGES? lOI 

this in another form, admitting that there has, without question, 
been an abnormal increase in the capital of the United States 
since the end of the war, the chief factor of which abnormal in- 
crease has been the saving in the cost of moving commodities by 
railway, can we measure this single force in any way ? 

In a treatise upon " The Railroad, the Farmer, and the Public," 
reprinted herewith, I have clearly proved the fact that had the 
merchandise,' one half of which consisted of crude farm products, 
which was moved in the year 1883, been subjected to the average 
charge per ton per mile which was charged on the whole railway 
service of the United States from 1866 to 1869 inclusive, the sum 
of such charge in 1883 would have been between twelve and 
fourteen hundred million dollars, in place of an actual charge of 
five hundred and fifty million dollars. Between these two periods 
the value in terms of gold of the principal farm products of the 
United States, which constitute at least one half the substance 
moved by the railway, has varied in very slight measure ; hence 
it follows that by far the greater part of the actual saving of labor 
which has been brought about by the extension and effective 
working of the railway system, had inured to farmers up to that 
time. 

This addition to our wealth has been in very great measure 
applied to an increase of capital in railroads, to improvements 
upon farms and farm buildings, and to various arts and manu- 
factures which must of necessity be carried on near to the farmers 
upon whom they depend for a market. 

Again, I have set aside, by the estimate of the census year, nine 
hundred million dollars, or ten per cent, of the commercial product, 
as the probable proportion of the annual product which could be 
applied to the maintenance, improvement, or increase of capital 
in that year. This was at the rate of $18 per capita of the popu- 
lation of that year. 

The population of the United States has averaged forty mil- 
lion for the whole term from i860 to 1880, or substantially that 
number. Multiply forty million by $18, and we have the average 



I02 WHAT MAKES 

sum of seven hundred and twenty million dollars each year, cor- 
responding to my estimate of the census year of nine hundred 
million dollars. Multiply seven hundred and twenty million dol- 
lars by twenty years, and we reach the sum of fourteen thousand 
four hundred million dollars, set aside from the production of 
the twenty years, for the maintenance and increase of capital. 
Deduct fourteen thousand four hundred million dollars from 
twenty-five thousand million dollars, which appears to be the 
utmost part of the census estimate of total wealth in 1880 which 
can be considered the work of man, and we leave only ten thou- 
sand six hundred million dollars as the saving of the nation 
through its whole previous history. This may perhaps lead to 
the conclusion that my estimate of ten per cent, now set aside as 
capital, is a. reasonable or perhaps excessive estimate of that part 
of the annual product which, in a normal year, can be set aside 
for its maintenance or increase ; $900,000,000 being ten per cent, 
of an estimated salable product of $9,000,000,000. If, during 
the last few years, there has been an abnornal increase of capital 
at the rate of more than $18 per capita, it has not been at the 
cost of the laborer, but it has been only a small part of that 
which the capitalists have themselves saved to the people in the 
extension of the railway system, and in the erection of factories, 
mills, and works of various kinds of the most productive and 
effective sort. This abnormal increase of capital has now ceased, 
and the prices of farm products are now falling. 

It is now probable that the great forces which I have re- 
cited have in some measure, or for the time, become exhausted, 
and that the present period of depression indicates a great change 
or adjustment of prices on a lower plane and of a permanent char- 
acter, which will be ultimately beneficial, but which in its progress 
is disastrous to many and very hard to be borne by all ; because 
in such a period constructive enterprises are checked, and the ex- 
isting population lives from hand to mouth, anxious as to what 
each day may bring forth. 

In such a period excessive taxation becomes an intolerable 



THE RATE OF WAGES? ' 103 

burden. This burden is to be measured by the ratio which the 
sum of all the taxes bears to the possible sum of all the savings of 
the community, rather than by its ratio to the gross value of all 
products ; in other words by its ratio to net income rather than by 
its ratio to gross income. It will be borne in mind that, with very 
few if any exceptions, all taxes are distributed, wherever they may 
be first imposed, and ultimately fall on all consumers in almost 
the exact ratio of their consumption. 

If imposed upon dwellings, they are charged to occupants with 
their rent, or their rent is enhanced so as to cover them. 

If imposed upon machinery or other instrumentalities of pro- 
duction, they are charged to the cost of goods and are recovered 
from the sales. 

If imposed upon railroads, warehouses, shops, or other instru- 
mentalities of distribution, they are charged to the cost of dis- 
tributing goods. 

If imposed upon the goods or wares themselves, whether under 
a tariff or an excise, they are added to the price and recovered from 
the sales. 

Taxation falls on rich and poor according to their consumption, 
while profits or savings are sorted under a very different law ; 
hence even the ratio of gross taxation to the net savings of the 
nation gives no true measure of its burden, but only brings its 
weight into prominence. 

To the rich a tax constitutes more of an annoyance than a 
heavy burden ; to the man of moderate income it merely causes 
a slight decrease of comfort or a small reduction in savings ; 
from the skilled workman it may take half of what he might have 
saved ; from the laborer it takes even the small pittance that 
might have served to mitigate the poverty of his later years ; and 
from the poor it takes a part of what is necessary to existence 
and reduces them to pauperism. No class of men have so grave 
an interest in an honest and economical government and in the 
reduction of taxation than those who possess no property of their 
own, but who depend wholly upon their daily work for their 
daily bread. 



104 WHAT MAKES 

It is for these reasons that while we may fejoice in the pros- 
perity which has enabled us to reduce our national debt and to 
put it in the way of final payment within the present century, we 
may now protest against the excess of taxation which finds men 
poor, keeps them poor, and will leave them poor, unless it is re- 
moved. 

Therefore the great issues of the hour are measures not men, 
and whatever may be the result of the elections now pending, 
every man chosen will be held to a stern account, and no glitter- 
ing generalities about the increase of national wealth will serve to 
meet the demand for relief from the intolerable burden of ex- 
cessive taxation (Novr., 1884). 

Having thus treated the probable profits or savings in the 
census year, and assuming that my estimates are approximately 
correct, and that there remained in the census year ^8,100,000,000 
worth of product to be divided in terms of money between the 
mental and manual workers, or between the administative and the 
executive force, in the form of salaries, wages, or earnings, the next 
problem is the subdivision of this sum. We can reach a close 
estimate of the mode of this subdivision by a consideration of the 
details of the census in respect to the occupations of the people 
and the ascertained rates of wages in special classes ; qualifying 
the figures by such additions to the rates given in the census as may 
be called for in each case, as before stated. 

We find in the list of all persons engaged in gainful occu- 
pations, 1,100,000 persons, under the following classification : 

Clergymen ........... 64,698 

Lawyers ............ 64,137 

Physicians and Surgeons ......... 85,671 

Teachers and Scientific Persons ....... 227,710 

Actors 4,812 

Architects ........... 3,375 

Artists, or Teachers of Art . . ... . . . . 9,104 

Authors, Lecturers, and Literary Persons ...... 1, 131 

Chemists, Assayers, and Metallurgists ...... 1,969 

Dentists 12,314 

Railroad Builders and Contractors ....... 1,206 

Civil Engineers .......... 8,261 



THE RATE OF WAGES? I05 

Officials of Railroad Companies « , . . . . . 2,069 

Traders and Dealers 481,450 

Bankers and Money Brokers ....••.. 15,180 

Officials of Banks 4.421 

Officials of Insurance Companies ....... i,774 

Manufacturers and Officials in Mf'g Cos ' 52,217 

Hotel Keepers 32,453 

Journalists 12,308 

Total i,oS6,2uo 

This classification is only fairly accurate. If it were possible 
to get the number, superintendents and foremen should be sub- 
stituted for about two thirds of the teachers who are in the lower 
grades. 

This class of persons represents those whose work is more 
mental than manual, more administrative than executive. In 
round numbers they amount to 1,100,000. The remainder of 
those who are listed as being engaged in gainful occupations con- 
stitute the actual working force — mechanics, artisans, clerks, fac- 
tory operatives, small farmers and farm laborers, domestic servants, 
common laborers, express men, conductors, and all others, 
whose work possesses a commercial value, and whose rate of wages 
constitutes the measure of their share of the annual product. 

Now, then, the last remainder of the assumed annual product 
amounted to $8,100,000,000; The total number of the actual 
working force in the list, aside from the administrative force, and 
recited as above in the census year, was 16,200,000. If to each 
one of these be assigned a rate of wages upon the average of 
$432 — being the sum which when subjected to the average per 
cent, or rate of national, State, and municipal taxation, would 
leave $400 net each per year,— the sum of all their wages 
would amount to $6,998,400,000. There would then remain 
$1,101,600,000 to be divided among the 1,100,000 persons of the 
first class, to wit : those engaged in the mental work, or in the 
work of administration ; and this sum would yield to each one of 
these annually $1,000. It will be observed that these conclusions 
were reached a priori, before any consideration or attention had 
been given to actual rates of wages as disclosed in the census 



Io6 WHAT MAKES 

being deduced from an estimate of the annual product reached in 
the manner previously described. 

Before testing these results by the actual data of the census, 
the total of persons occupied should be considered. It is as fol- 
lows : 

Agriculture, males ......... 7,075,983 

" females 594,510 

Professional and Personal Service, males ..... 2,712,943 

" " " " females ..... 1,361,295 

Trade and Transportation, males ....... 1,750,892 

" " " females. ...... 59.364 

Manufacturing, Mechanical, and Mining, males .... 3,205,124 

" " " " females . . . 631,988 

Total of all classes 17,392,099 

Total, aside from Agriculture ...... 9,721,606 

Deduct Civil and Military Employes of the Government in subor- 
dinate or minor positions, say ...... 92,000 

Total, in round figures, of all persons engaged in any gainful pro- 
ductive occupation ........ 17,300,000 

Deduct administrative and mental work ..... 1,100,000 

Total in the actual work of production or distribution, who are 

substantially the wage-earners ...... 16,200,000 

The first test by which the approximate accuracy of this esti- 
mate of about $432 average earnings may in some measure be 
determined will be found in the exhaustive treatise of the census, 
upon Transportation, compiled by the special agent, Mr. A. E. 
Shuman. This compilation is based upon the actual returns 
from existing railroads, for specific periods of twelve months, 
corresponding to the making up of their accounts in the year 
immediately preceding the census Now, it is well known that 
the accounts of railroad operations are of necessity kept in the 
most accurate manner. Hence these returns may be considered 
as more closely approximating the actual earnings of the em- 
ployes than any other returns of the census. It will also be ob- 
served that railroad employes are almost wholly men, and that 
among these men are represented the highest-paid officials, and 
also the lowest-paid laborers. They number as follows : 



THE RATE OF WAGES? 



107 



General officers 
Clerks 
Station men 
Engineers . 
Conductors 
Other train men , 
Machinists . 
Carpenters . 
Other shop men , 
Track men . 
All other employes 



3.375 

8,655 

63,380 

18,977 
12,419 

48,254 
22,766 
23,202 
43,746 
122,489 
51,694 



Total 418,957 

The clerks being counted in the work of administration, and 
the large proportion of well paid engineers and conductors carry- 
ing up the executive average of earnings. 

The sum of their earnings was $195,350,013, averaging to each 
person for the year $466. But, upon a further analysis, it ap- 
peared that the average earnings of officers and clerks — three per 
cent, of the total number — amounted to $1,015.44 each ; the av- 
erage wages of all the others — ninety-seven per cent, of the total 
number — were $450 each. If I am right in assuming that these 
railroad employes are a fairly representative class of all men em- 
ployed in gainful occupations, bearing in mind the less rate of 
earnings of women, these figures, both of the higher grade of ad- 
ministrative work and the lower grade of executive work, fairly 
correspond to the averages of my assumed figures covering all 
persons occupied within the limits of the country. 

We will next consider another class of persons, chiefly men 
and boys, to wit : all who are listed as being employed in mining 
the non-precious metals — iron, copper, lead, and zinc. In a 
special report upon this industry, it appears that the total number 
returned is 220,475 '■> the sum of salaries and wages paid, $71,- 
992,502 ; an average to each person of $327. But all the census 
experts concur in the opinion that this sum did not represent 
over three fourths of a full year. Many new mines were opened 
during the census year, of which the returns covered only a part 
of the year ; and, as has been stated by Mr. Weeks, work is not 



Io8 . WHAT MAKES 

continuous, even in mines at regular occupation. If, then, we 
increase the sum of $327 by the addition of one third, thereby- 
converting the term into a full year's payment, provided these 
men find employment in other occupations, we reach an aver- 
age of $436 as the income of each person employed in this 
arduous work. The proportion of those who are engaged in the 
work of administration being less than in the railroads, a fair ap- 
proximation is made to the income of the wage-earners of $400 
per year (see previous figures on iron). 

The next mode of comparison may be with the average earn- 
ings of all persons who are listed in the census under the head 
of manufacturing. That comprised 2,019,135 men, 531,639 wo- 
men, and 181,921 children, — a total working force of 2,732,695. 
The sum of their earnings or wages was $947,953,795, — giving 
an average to each person of $346. But this result again must 
be subjected to very important qualifications. The list of occu- 
pations listed under the term of manufactures includes brick- 
making, which can only be followed six months in the year ; 
lumber-men's work, generally limited to six months in the 
year. Other branches of industry, which are continuous, are 
again subjected to the qualification named by Mr. Weeks. The 
writer was one of the special experts employed in taking the cen- 
sus of the cotton manufacture. He began among the first, and 
gave a construction to the directions which he received, which 
led him to omit from the number of persons and sum of wages 
in the cotton manufacture those who were engaged as agents or 
superintendents in charge of the work. In all other branches of 
the census he has been informed that the administrative force 
was included. The wages in the cotton manufacture appear to 
be only $245 each per year, by far the larger portion of those 
employed being women and children ; but in his judgment this 
sum should be raised to at least $280 and, including administra- 
tive force, perhaps to $300 per year, in order that it may be 
made to correspond to full year's work of those who were con- 
tinuously employed. 



THE RATE OF WAGES? 1 69 

In general, it may be said that the necessary qualifications by 
which the average wages disclosed by the census, in respect to 
all manufactures, should be governed, would lead to the conclu- 
sion that $346 represented not over ten months' work. And if 
then we add one fifth of $346, to make up for the two months, we 
reach a general average, including the administrative force, of 
^415 each, — again substantially corresponding with the conclu- 
sions of the writer, and again substantially corresponding to the 
railway figures giving due consideration to the lower wages of 
women and children. 

Subject to these qualifications, the following specific data from 
the census are given, in respect to branches of manufacture 
which may be considered substantially continuous. Each branch 
may be qualified, according to the judgment or knowledge of the 
reader. It should be noticed that those who are listed under 
the head of carpentry are only the carpenters who are engaged 
in manufacturing establishments of which the product exceeded 
$500 a year ; and it does not include miscellaneous carpenters, 
who are much more numerous. In all the textile arts the figures 
should probably be raised at least one fourth, in others more or 
less according to the special conditions of each case. 





Men. 


Women. 


Children. 


Total. 


Wages. 


!^vge. 


Agricultural Implements, 


. 38,313 


73 


1,194 


39.580 


$15,359,610 


$388 


Book Binding and [ 
Blank-Book Making, \ 














5,127 


4,831 


654 


10,612 


3,927,349 


371 


Boots and Shoes, 


104,021 


25,946 


3,852 


133,819 


50,995,144 


381 


Bread and Bak- ) 
ery Products, \ 














18,925 


2,210 


1,353 


22,488 


9,411,328 


419 


Carpentry, 


53,547 


77 


517 


54,138 


24,562,077 


454 


Cars, — Railroad ) 
and Street, [ 














13,885 


13 


334 


14,232 


5,507,753 


3SS 


Carriages and Wagons, 


43,630 


273 


1,491 


45,394 


18,988,615 


400 


Men's Clothing, 


77,255 


80,994 


2,504 


160,753 


45,940,353 


2S6 


Foundries and ) 
Machine Shops, f 


140,459 


675 


4,217 


145,351 


65,982,133 


454 


Furniture, 


45,180 


917 


2,620 


48,717 


20,388,794 


418 


Jewelry, 


10,050 


1,998 


649 


12,697 


6,441,688 


507 


Leather Currying, 


10,808 


77 


168 


11,053 


4,845,4^3 


438 


Leather Tanning, 


23,287 


188 


337 


23,812 


9,204,243 


387 


Malt Liquors, 


27,001 


29 


190 


26,220 


12,198,053 


468 



no WHAT MAKES 





Men. 


Women. 


Children. 


Total. 


Wages. Avge. 


Marble and Stone, 


21,112 


23 


336 


21,471 


10,238,885 $477 


Paper, 


161I33 


7,640 


649 


24,422 


8,525,355 


349 


Printing and Publishing, 


45,880 


6,759 


5,839 


58,478 


30,531,627 


522 


Tobacco, Cigars, ) 
and Cigarettes, [ 


40,099 


9,108 


4,090 


53,297 


18,464,562 


347 


Hardware, 


14,481 


814 


1,506 


i6,8or 


6,846,913 


407 


Cotton Goods, 


64,107 


91,148 


30,217 


185,472 


45,014,419 


245 


Cutleiy and Edge Tools, 


9.458 


380 


681 


10,519 


4.447.349 


422 


Glass, 


17,778 


741 


5.658 


24,177 


9,144,100 


379 


Hats and Caps, 


11.373 


5,337 


530 


17,240 


6,635,522 


385 


Hosiery and Knit Goods, 


7,517 


17,707 


3,661 


28,885 


6,701,475 


232 


Mixed Textiles, 


17,471 


20,520 


5,382 


43.373 


13,316,753 


30S 


Musical Intruments. 


6,449 


57 


69 


6,575 


4,603,193 


692 


Woollen Goods, 


46,978 


29,372 


10,154 


86,504 


25,836,292 


300 



No data exist by which the earnings of agricultural laborers 
can be positively converted into terms of money, owing to the 
fact that by far the larger portion receive a part of their wages in 
kind, and not in money. By the courtesy of Mr. J. R. Dodge, 
the statistician of the Agricultural Department, I am enabled to 
submit the following table of wages of agricultural laborers in 
the year 1882. Due consideration being given to the domestic 
consumption of the farmer, I think they substantially sustain my 
assumed average of the subdivision of the annual product. 

Many of these men are engaged in the winter as lumbermen or 
other occupations, or as stated by Mr. Weeks, in mining, they 
making up their rate to the full average for the year. 

No census data exist by means of which the average earnings 
of persons engaged in trade or commerce can be estimated. The 
average of those who are engaged in other kinds of transporta- 
tion than by rail, to wit, upon rivers, expressmen, and wagoners, 
may be considered in the ratio which these occupations bear to 
the railway service. The men who are employed in these other 
branches of transportation are continually changing, sometimes 
being engaged upon the railway, sometimes in the other branches 
of the work. 

The average earnings of persons in domestic service can only 
be established by their known ratio to the work of the factory 
operative, or of other persons engaged in analogous employ- 
ments. 



THE RATE OF WAGES? 



Ill 



FARM WAGES IN 1882.^ 

By the Month, and by the Day, in Harvest ; with payment in Cash, and also 
in Money supplemented by Board. 





Montlily Wages 


Transient Wages 


States 
and 


By the 


Year. 


During Harvest, per day. 


Territories. 


Without 


With 


Without 


With 




Board. 


Board. 


Board. 


Board. 


Maine 


$24.75 


$16.75 


$1-52 


$1.22 


New Hampshire 




25-25 


16.72 


1. 71 


1-35 


Vermont . . . 




23-37 


16,00 


1.75 


1-35 


Massachusetts 






30.66 


18.25 


1-75 


1.35 


Rhode Island 






27.75 


17.00 


1.60 


1.30 


Connecticut . 






27.90 


17-37 


1.65 


1-33 


New York . 






23.63 


15-36 


1.89 


1-47 


New Jersey . 






24.25 


14.20 


2.09 


1.74 


Pennsylvania , 






22.88 


14.21 


1-73 


1.30 


Delaware 






18.20 


12.50 


1.60 


1.25 


Maryland 






16.34 


9.89 


1.52 


I.I5 


Virginia . 






13.96 


9.17 


1.27 


•99 


North Carolina 






12.86 


8.80 


1.20 


.85 


South Carolina 






12.10 


8.10 


1.08 


.78 


Georgia . . . 






12.86 


8.70 


1. 10 


.80 


Florida . . 






16.64 


10.20 


1. 12 


.80 


Alabama . , 






13-15 


9,09 


1.05 


.80 


Mississippi . 






15.10 


10.09 


1.23 


.95 


Louisiana 






18.20 


12.69 


1. 10 


.85 


Texas . . . 






20.20 


14-03 


1-39 


1.08 


Arkansas . . 






18.50 


I2.?5 


1-34 


1.02 


Tennessee . 






13-75 


9-49 


1.30 


1. 00 


West Virginia 






19.16 


12.46 


1.30 


1. 00 


Kentucky 






18.20 


11.75 


1-54 


1. 18 


Ohio . . . 






24-55 


16.30 


1.79 


1.41 


Michigan . . 






25.76 


17.27 


2.13 


1.76 


Indiana . 






23-14 


15-65 


1.89 


1-58 


Illinois . 






23.91 


17.14 


1. 91 


1-54 


Wisconsin 






26.21 


17.90 


2.50 


2. ID 


Minnesota . 






26.36 


17-75 


2.61 


2.16 


Iowa . ... 






26.21 


17-95 


2.25 


1. 81 


Missouri . . 






22.39 


13-95 


1.59 


1.23 


Kansas . , 






23-85 


15-87 


1.70 


1.35 


Nebraska . 






24-45 


16.20 


1-95 


1-57 


California 






38-25 


23.45 


2.30 


1.86 


Oregon . , 






33-50 


24-75 


1.92 


1.50 


Colorado . . 






36-50 


27.08 


2.21 


1.80 



J. R. Dodge, Statistician. 



* It will be observed that the foregoing list only cov-r* the rates of wages of 



112 WHAT MAKES 

The average pay of common laborers in the census year varied 
from $1 to $1.50 for the working days of the year ; but it is well 
known that the daily rate cannot be considered as a continuous 
rate throughout the year. The average earnings of common 
laborers could not have been more than $400 a year ; but it may 
perhaps be admitted that they fairly approximated that sum, 
again sustaining my assumed figures. 

It therefore follows that .if the value of the annual product ap- 

farm laborers. The larger part of the whole number of persons listed as being 
engaged in agriculture are listed as farmers, and not farm laborers. 
The total number employed in agriculture is : 

Male 7,075,983 

Female 594,510 

Total 7,670,493 

It is probable that each one of these persons stands at the head of a somewhat 
larger group than the average group of 2.90 in all arts, and that not less than 
one half the population, or 25,000,000 persons, were wholly dependent upon 
this agricultural portion of the working force in the census year. 

The primary value of the farm product of 1879 (subject to moderate increase 
in 1880), as given in the census, is $2,212,540,927, but the census experts 
point out the necessity of adding materially to this sum, to cover the home con- 
sumption of the farms. 

I have ventured to add $i,ooo,cfoo,ooo to this computation of the primary 
value, in order to cover the domestic consumption of the agricultural popula- 
tion, which never appears in the commercial tables, but which should be com- 
puted and added to the agricultural product, as well as other almost necessary 
omissions in the census which should be added in order to show the relation 
which the work of each person devoted to agriculture bears to the work of each 
person engaged in other branches of industry. 

This was also an a priori conclusion, but if we add to the census valua- 
tion $2,212,540,927, the sum of $1,000,000,000, for domestic consumption, and 
divide by the number of persons occupied, 7,670,493, we get an average pro- 
duct of a fraction less than $419 each, again fairly corresponding to my assumed 
average. 

It will be observed that the total number of farms was 4,008,907, averaging 
substantially seventy acres of improved land each. There were substantially one 
farmer and one laborer to each farm, and it therefore appears that the average 
farmer can be assumed to earn but a moderate sum above that of the farm 
laborer. 

i 



TH£ RATM OF WAGES? 113 

proximated $10,000,000,000, the average wages of earning people 
must have approximated $432 a year ; and upon what this sum 
would purchase nearly three (2.90) persons were on the average 
sustained. This gives $147 per year, or 40 cents a day to each 
person. That is to say, each person on the average was sub- 
sisted, sheltered, and clothed on what 40 cents a day would buy 
from that part of the commercial product available for wages. 

If such was the measure in money of all that was produced, 
which could be made subject to division or commercial distribu- 
tion, then it will be apparent that there could be no greater sum 
or money's worth to be divided. If any less part of the product 
had bee:i set aside for profits or increase of capital than that 
which I have assigned hitherto, then the increase of capital would 
have been checked, and the production of the next and of ensuing 
years, in ratio to the number of existirig persons, would have suf- 
fered. 

There can be no general rise in the rates of wages, except 
by means of an increase in the quantity of things produced, 
coupled with the maintenance of the prices at which such products 
can be sold. There may be an increase in the general welfare, 
by way of an increase in the quantity of things produced, coupled 
with a decrease in price, which shall not affect ttie gross value 
of the whole, so that the rate of wages may buy more commodi- 
ties ; or, in other words, may represent a larger quantity of 
things. There may be increase in the general welfare brought 
about by the increase in quantity and decrease in price, coupled 
with a decrease in the money rate of wages, if such a decrease in 
the rate of wages does not go below the decrease in prices. 

I have before referred to the burthen of excessive taxation, 
but this point cannot be too often pressed. So far as the 
proceeds of taxation are expended for just administration, for a 
good government, wisely and honestly administered ; or in mu- 
nicipal affairs, so far as the avails of taxation are expended in 
the maintenance of good highways, of sewers, in providing an 
adequate water supply, and in sustaining the common schools, — 



1 14 tVHA T MAKES 

taxation cannot be considered a burden, but is a distribution of 
a part of the annual product, for the common welfare and for 
the general benefit. But so far as the proceeds of taxation are 
wasted or misspent, then taxation becomes an intolerable bur- 
den, and it must be gauged, not by its ratio to the gross product 
of the country, but by its ratio to the net income, or to the possible 
savings of each person. The conviction of the writer is that all 
taxation ultimately falls upon consumers, in the ratio of their con- 
sumption, no matter where the taxation is first laid, whether it be 
a direct tax upon real estate, or an indirect tax upon certain speci- 
fied articles. If a tax is laid upon real estate occupied for com- 
mercial purposes, it becomes a charge upon the distribution of 
the goods. If it is levied upon land used for agricultural pur- 
poses, it enters into the money cost of production. If it be ad- 
mitted that taxes are borne in the ratio of consumption, and that 
producers are merely the agents for their collection, even very 
heavy taxes may constitute no real burden upon persons who are 
in the possession of large property or large incomes. They may 
be but a light burden upon persons of moderate means or mod- 
erate income ; but when they either restrict the consumption of 
the necessaries of life, or take from working people the little mar- 
gin which might be saved, they become intolerable, — if they are 
either unjust or unnecessary. 

If the estimate of the salable or exchangeable value of our 
annual product which I have assumed in this treatise is even ap- 
proximately correct, then eight per cent, upon such exchangeable 
value, aggregating $9,000,000,000, is distributed by way of taxa- 
tion, — the aggregate of the National, State, County, City, and 
Town taxes in the census year having exceeded $700,000,000 

If I have set aside a sufticient sum to represent profits, to wit : 
ten per cent, of the total product, half being assigned as the prof- 
its of capital, and half being assigned as the savings of those 
who perform the work of distribution or production, $900,000,000 
in all, then the taxes of 1880 bore the ratio of eighty per cent, to 
the probable savings of the country. If it may have been possible 



THE: RATE OF WA^ES^ \\i^ 

in some one extremely prosperous year since the war, to set aside 
fifteen per cent., or $1,450,000,000, still the actual taxes bore 
the ratio to this sum of fifty per cent. Now, if it be true that 
nine tenths or more of all who are engaged in gainful oc- 
cupation must subsist, save, and pay taxes out of an average 
income of $400 to $500 a year, and if of this sum $32 to $40 
must be set aside to meet the heavy taxation of this country, 
it follows that such a burden may not only deprive a very 
large portion of the working people of this land of the op- 
portunity to save any thing, but may even take from very many 
of them a part of that which is necessary even for a com- 
fortable subsistence. It follows that the man upon whom the 
burden of taxation falls heaviest is he who possesses no property 
whatever. It finds him poor, it keeps him poor, and it may even 
reduce him to pauperism ; yet he may never know the cause of 
his poverty, and may resist the very changes in the system of 
taxation which Avould benefit him most. The writer is of the 
profound conviction that whenever the subject of taxation is re- 
duced to a science, taxation on real estate will become the source 
of nearly all taxes. A tax on real estate cannot be evaded ; it dif- 
fuses itself with unerring certainty ; it forces unoccupied land into 
productive use ; it compels the most conservative class in the 
community to take an active part in true politics, and to watch 
the expenditures of the Government, whether national. State, or 
municipal, with the closest scrutiny. Such a tax may perhaps be 
supplemented by taxation on railways, gas companies or other 
franchises which are somewhat restricted in their nature and by 
an excise on spirits collected from the producer ; but this opens 
a broad subject outside the scope of this treatise. 

I am aware that some observers compute the value of our an- 
nual product at a larger sum than I do, but on the basis of the 
population of 1880 and the data of that year, I can find no trace 
of larger earnings or greater profits than my computation would 
have yielded. 

No one can be more aware than the writer of the huge difficul- 



tl6 WHAT MAKES 

ties which occur in computing the accumulated wealth of the 
country or the value of the annual product, in terms of money. 
It can only be by bringing these vast aggregates to individual 
units that an estimate can be made with even approximate ac- 
curacy. Attention has often been called in the treatises upon 
political economy to the small proportion which the aggregate 
value of accumulated wealth necessarily bears to the money 
value of the annual product. Owing to the method of taxation, 
to the various official returns of the States and cities, and to the 
great skill of Mr. Carroll D. Wright, by whom the census of 1875 
was taken, the actual money value both of land and of the capital 
which has been placed upon the land in the State of Massachu- 
setts can be ascertained with almost absolute certainty. So, also, 
the value of the annual product of Massachusetts can be approxi- 
mated with almost absolute certainty. By these figures, it appeared 
that the absolute value of all the capital of the State of Massa- 
chusetts in 1875, /. e., of the mills, workshops, railroads, dwell- 
ings, goods, and wares, which had been converted into form for 
human use by human work, did not exceed three years' annual 
production. If the data of the census of the United States could 
be treated in the same exhaustive way, and the value of the land 
could be deducted from the gross sum of $44,000,000,000, given 
as the estimate of wealth, it would without doubt appear that the 
actual capital of the country could not exceed twice or twice add a 
half the value of its annual product. When the complaint is made 
that a good subsistence and an adequate shelter can barely be 
obtained by each three persons upon an average income of only 
$400 to $500 a year, at the retail value of all they consume of 
their own production, or procure by purchase or exchange for the 
three, the only remedy which can be provided is to increase the 
product. If such is the present measure of all there is, then such 
is the measure of the utmost that all can have. How difficult and 
how slow such an increase must be, may be comprehended by a 
very simple statement : Assuming the maximum of $10,000,000,- 
000 given in this treatise as the present value m the census year, or 



THE RATE OF WAGES? 11/ 

about 11,500,000,000 — now then over $1,000,000,000 worth of pro- 
duce must be added in a year and the prices must be maintained 
where they are, in order that each person of our present population 
may have five cents a day more than they now do, or in order that 
each person engaged in any kind of gainful occupation may be 
able to obtain an increase in the rate of wages of fifteen cents a 
day. Upon such small fractions must subsistence depend, and 
when politicai leaders present magnificent pictures of national 
progress, summed up in thousands of millions of wealth or pro- 
duct, these facts may well be recalled. 

Even if our progress has been great and our conditions are 
relatively prosperous compared to other nations, yet the average 
person, including capitalists, landowners, employers and em- 
ployed must have been sustained and sheltered, must have paid 
taxes and saved profits, out of what fifty cents a day would buy 
in the census year, because such was apparently the measure of all 
there was produced which could be bought and sold or exchanged. 

APPROXIMATE SUMMARY. 

Total product of the U. S. $10,000,000,000, worth per day 
to each person as estimated ...... 55 

Domestic production, consumed without purchase or sale . 5 

50 cts. 

Share of capitalists ....... 2-| 

Savings of the people ....... 2^ 

National, State, and Municipal taxes . . . . 3j 

Cost of mental or administrative work , . . . I^ 
Average to each wage earner . . . . . .40 

50 cts. 

For each error of five cents a day in this estimate, — if the reader 
finds one or believes that there may be an underestimate — add 
one thousand and fifty-eight million five hundred thousand dollars 
to my gross estimate and divide the proceeds among the 58,000,- 
000 persons who will probably constitute our population on the 
ist Jan., 1885. 



APPENDIX II. 



THE LAW OF COMPETITION : IN ANY GIVEN PRODUCT, PROFITS 
DIMINISH, WAGES INCREASE. 

The following deductions have been made from the accounts 
of two New England cotton factories, both constructed prior to 
1830, and operated successfully and profitably since that date, 
mainly on standard sheetings and shirtings — No. 14 yarn. The ' 
figures given, from 1840 to 1883 inclusive, are absolute, being 
taken from the official accounts of mills, of which the sole pro- 
duct has been a 36-inch standard sheeting. The figures of 1830 
are deduced from a comparison of the data of two] mills. The 
figures of 1884 are deduced from nine months' work in 1883-4. 



WAGES PER OPERATIVE PER YEAR. 



1830 164. gold. 

1840 175. gold. 

1850 190. gold. 

i860 397. gold. 

1870 275. cur. 

1870 240. gold. 

i£;8o 259. gold. 

1883 287. gold. 

1884 290. gold. 



PROFIT PER YARD NECESSARY TO BE SET ASIDE IN ORDER TO PAY ID PER CENT. ON 

CAPITAL USED. 



1830 2 


400. gold 


1S4O I 


181 gold. 


1850 I 


no gold. 


i860 


688 gold. 


1870 


760 cur. 


1870 


660 gold. 


1880 


481 gold. 


1883 


434 gold. 


.384 


408 gold. 



riS 



THE RATE OF WAGES. 



119 



YARDS PER OPERATIVE PER YEAR. 



183 o 

184 o 

1850 
i86<.> 
1870 
188c'? 

fo83 



4,321 
9,607 
12,164 
21,760 

19,293 
28,000 

26,641 

28,032 



830 1.500 gold. 
840 1.832 gold. 
850 1.356 gold. 
860 .903 gold. 
870 1.423 cur. 
870 1.240 gold. 
.930 gold. 

i.oSogold. 

1.070 gold. 









s 


\ 


COST OF LABOR PER YARD. 





Changes in the ma- 
chinery affected 
production. 



COMPARISON OF 1840 WITH 1883-4. 

This comparison will not show the full reduction in the cost 
of labor per yard which may be expected in 1884-5, because 
changes have been in progress which, when completed, will in- 
crease the capacity of the mill about 15 per cent., and it is a well- 
understood rule that, while such changes are being made, the 
current work of production is done at a disadvantage. 



1840-1884. 



I. 


—Capital . . . 


1840 


$600,000 






1883 


$600,000 


11. 


—Fixed capital . 


1840 


$310,000 






1883 


$310,000 


III. 


—Active capital. 


1840 


$290,000 






1883 


$290,000 


IV. 


—Spindles . . . 


1840 


12,500 






1883 


30,824 


V. 


—Looms . . . 


1840 


425 






1883 


1,000 


VI. 


—Fixed capital 


1840 


$23.20 




per spindle . 


1883 


$10.06 • 


VII. 


—No. of opera- 


1840 


53°" 




tives emp. 


1883 


527" 


VIII. 


—Operatives per 


1840 


42 4-10 ■ 




1,000 spindles 


1883 


17 20-100 • 



( Same. 

( Same. 

( Same. 

( Increase, 
( 146 per cent. 

j Increase, 
( 13s per cent. 

( Decrease, 
j 37 per cent. 

( Same. 

j Decrease, 
\ do per cent. 



I20 



WHAT MAKES 



IX. 


— Lbs. per spin- 


1840 


0.456 




dle per day . 


1883 


0-556 


X. 


—Lbs. per oper- 


1840 


10 76-100 




ative per day 


1883 


31 20-100 


XL 


—Hours worlc 


1840 


+ 13 




per day . . 


18S3 


II 


XII. 


—Lbs. per oper- 


1840 


0.83 




ative per hour 


1883 


2.83 


XIII. 


— Wages per op- 


1840 


$175 




erative pr. y'r 


1883 


$287 


XIV. 


—Wages per op- 


1840 


4.49 cts. 




erative pr. li'r 


1883 


8.80 cts. 


XV. 


— Wages per y'd 


1840 


1.82 cts. 






1883 


i.oS cts. 


XVI. 


—Profit per y'd 


1840 


I. 18 cts. 


lo 


per ct. on capital 


1883 


0.43 cts. 


XVII. 


— Price of goods 


1840 


9.04 cts. 




cost cotton same 


1883 


7.04 cts. 



t Incre: ise, 
j 22 per c ent 

( Increa .se, 
') 190 per can' 

( Deere- ase, 
') 15 per c :ent. 

( Increi ise, 
1 240 per ^ ';en': 

( Increase, 
( 64 per cent. 

) Increase, 
■ 1 96 per cent. 
■»"™ Decrease 
41 per cent, 

j Decrease, 
( 63 per cent. 

j Decrease, 
( 22 per cent 



COMPARISON OF 1830 WITH 1884. 

In this comparison the statements are based in part upon the 
figures of each mill. Both appear to have cost about $40 per 
spindle, including dwellings for operatives. More than one kind 
of goods were made in each for a time, but the figures have been 
adjusted to standard sheetings, an average having been computed 
by the yard and pound. 



Fixed capital 

Spindles , 

Fixed capital per spindle . 
Operatives per 1,000 spindles 

Pounds per operative per 

day 

The hours of labor in most of the factories 
in 1830 were 14 per day. 
Wages per operative per 1830 S164 ■ 

year 1884 $290 ■ 

The wages per hour in 1884 are more than 
double those of 1830. 
Wages per yard 18 



1830 


$332,000 


1884 


$310,000 


1830 


8,192 


1884 


30,824 


1830 


$40.50 


1884 


$10.07 


1830 


49 


I8S4 


17 2-10 


1830 


9.94 


1884 


31.22 



- Decrease, 

37 per cent. 

Increase, 

276 per cent. 
Decrease, 
75 per cent. 
Decrease, 
64 per cent. 
Increase, 

1214 per cent. 



Profit per yard at 10 per 
cent, on capital . . 



1.90 cts. 

1.07 cts. 

2.40 cts. 

.41 cts. 



Increase, 
77 per cent. 



Decrease, 

44 per cent. 
Decrease, 
83 per cent. 



THE RATE OF WAGES? 121 

In the mountain section of the southern United States the peo- 
ple are still clad in homespun fabrics. Five women — two carders, 
two spinsters, and one weaver — can produce eight yards per day. 



Product of 5 per- 
sons I year in 2,400 
North Carolina yds. 

Product of 5 per- 
sons in New 140,000 
England . . . yds. 

Wages in New 
England at 
1.80 cents, per 
yard .... $287.00 

Wages as they 
would be in N. 
C ar o 1 i n a at 
1.08 cents, per 
yard .... $5.19 

Cost per yard in 
New England 
at $287 per year 
each operative i.o8c. 1 

Cost in N'th Car- 
olina at $287 
per year each 
operative . . 58.49c. 



The rule of diminishing rates of profit and increasing rate of wages, of neces- 
sity ensuing from the progress of invention, is fully sustained by these tables. 
As the capital is increased both in its quantity and in its effectiveness, the abso- 
lute share of product falling to capital is increased, but the relative share is 
diminished. On the other hand, the share of the laborer is increased, both abso- 
lutely and relatively. Labor takes of necessity a constantly increasing propor- 
tion of an increasing product. In this example, the wages of the operatives 
have increased, since 1840, 64 per cent, per day and 96 per cent, per hour ; 
since 188O, 77 per cent, per day and + 100 per cent, per hour. High wages in 
money have ensued as the necessary result of the low cost of labor. 

It will be observed that in 1840 the price of standard sheetings being 9 cents 
a yard it required 1.18 cents to be set aside for profits, or 13 per cent, of the 
price, in order to pay 10 percent, upon the capital. Next it required 1.83 cents 
to be set aside, being 20 per cent, of the whole price, to pay wages at the aver- 
age rate of only $175 a year to each operative. In 1884, the price being 7 cents 
a yard, it required less than 6 per cent, of the gross sales, 0.40 cent a yard, to 
beset aside in order to pay 10 per cent, upon the capital, while 1.07 cents being 
set aside as the share of labor, or a fraction over 15 per cent, of the gross sales, 



1 22 WHA T MAKES 

yielded to the operative $2go in gold. The goods cannot now be sold at 7 
cents, and there is little or no profit for the time being. But while 10 per cent, 
was a moderate rate of profit in 1840 it is an excessive rate in 1884. The busi- 
ness would extend with great rapidity if there were a positive assurance of 6 per 
cent, upon the capital, or a quarter of a cent a yard and less than d,\ per cent, 
of the gross amount of sales. 

But it may be said, having assigned 0.40 cent to profits, and 1. 07 cents to 
labor out of 7 cents a yard gross value, there remain 5.53 cents a yard to be 
accounted for. This of course represents the money cost of cotton, fuel, starch, 
oil, supplies, taxes, cost of administration, transportation of the goods to market, 
and the cost of selling them at wholesale. 

Does this all go to labor, or is there also a profit to be set aside on these 
elements ? 

Our space would not suffice to treat each one of these subjects, but it may be 
said : First, the cotton is substantially all labor ; there is no large margin of profit 
at the present time in raising cotton, which is mostly produced by small farmers. 
Second, the other items constituting the materials, form a very small part of the 
total cost, and are subjected to profits in small measure only in respect to fuel 
and oil. 

The cost of transportation yields to the railroads less than an average of 5 
per cent, on the capital invested, and cotton fabrics pay but a small fraction of 
their value even for very long distances. The cost of administration constitutes 
a very small part of the cost of the goods, and in a general treatise on wages 
belongs in a class by itself rather than to be considered as profits. The charge 
for sfflling staple plain cotton goods at wholesale does not exceed i per cent, to 
\\ percent., and a large part of this is distributed among the clerks and salesmen 
who do the work. 

If the subject is analyzed, first, as a whole, and, second, in each department, 
it will appear that at the present time the proportion of profit which can be 
set aside from the sale of coarse cotton goods sufficient to cover profits in all 
the various departments of the work, is less than 10 per cent, of the wholesale 
market value of the product, and 90 per cent, is the absolute share of the laborers 
who do the work both in respect to materials used and to the finished product. 

It is also necessary to remember, in respect to the cotton factory, that the 
value or proportion of capital to a given product is greater than in almost any other 
branch of industry ; the proportion of capital to product being $1 of capital to 
each $1 or $1.50 of product, according to the weight of the fabric and the 
quantity of cotton used. In the boot and shoe factory, on the other hand, the 
ratio of capital to product is about $1 to $3; therefore in the boot and shoe busi- 
ness a much less proportion of the gross sales needs to be set aside as profit on, 
the business, to induce its being established. 



THE RATE OF fVAGES ? I23 

On the whole, so far as the manufactures of New England are concerned, 
the average of capital to the gross value of the products is one dollar capital to 
two dollars product ; therefore three per cent, of the gross sales set aside as 
profit will yield six per cent, per annum upon the capital invested in the buildings 
and machinery which are applied to the conversion of raw or half manufact- 
ured material into finished forms ready for final consumption. 

The foregoing charts have been prepared on the basis of tables 
giving the actual facts in respect to the machinery, the product, 
and the wages of two successful cotton-mills, manufacturing what 
are known as standard sheetings, in New England. Technically 
these goods are known as 36-inch sheetings, No. 14's. In point 
of fact, the number of the yarn is a little coarser. The data have 
been combined so as to cover the entire period from 1830 to the 
present date, a part of them having been furnished from one mill 
and a part from the other. I have in my possession the accounts 
of many other cotton factories, and the statistics of the wages, 
covering a great variety of fabrics, during the last fifty years ; but 
I have carefully chosen the data of two factories which have been 
uniformly successful, in which the capital stock has never been 
reduced, and of which the product has, to a large extent, been 
sold for export. This selection has been made in order that the 
data might not be affected in any measure beyond that of other 
occupations than cotton-spinning, by the many changes in the 
tariff which have been made since 1830. 

In the main treatise of which this is an appendix, I have at- 
tempted to sustain the proposition that the rate of wages cannot 
be taken as a standard for determining the cost of production, 
even in money ; but, on the contrary, that wages are a remainder 
over, or result of production, recovered from the sale of the goods, 
and subject to the prior claim for payment of the cost of materi- 
als and the profits of capital. 

Wages will vary in rate in the same country, at different peri- 
ods, in the same place ; at the same period in different places ; in 
different countries at the same time, — being determined by the 
distance of the factory from the source of the materials, by the 



124 WHAT MAKES 

intelligence and skill of the people who do the work, by the 
incidence of taxation, (the laws of different States varying on 
this point) and by many other elements which enter into the 
problem. On the other hand, although wages are deferred to 
profits, and are a remainder over, subject to deduction of profits 
from the sales, yet the competition of capital with capital not only 
always tends to a minimum of profit, but also to an increase of the 
product in ratio to the amount and effectiveness of the capital. 
Hence, while profits tend to a minimum, wages tend to a maxi- 
mum. It therefore follows that, under these conditions, wages 
constitute an increasing proportion of an increasing product, pro- 
vided markets can be found to take the increase without a reduc- 
tion in price corresponding to the reduction in the labor which 
constitutes the true cost. In point of fact, very few nations have 
learned to apply machinery to the arts of life, — a larger portion 
of the population of the world is clad in homespun than in mach- 
ine-made or factory-made fabrics. I have lately read a notice 
of a recent report, made in Manchester, to the effect that nearly 
1,000,000,000 persons, out of a- computed total of 1,400,000,000, 
may be considered as non-machine using nations, clad in hand- 
made fabrics, so far as they are clothed at all. In the United 
States, machinery is applied, on the whole, more effectively than 
anywhere else. Hence, although prices have diminished, they have 
not diminished as fast as the labor cost of production has been 
reduced. Consequently, wages have not only risen in rate, but 
also in purchasing power. All of this is proved by the figures 
of the charts which have been given above. 

Between the two extreme dates which I have covered in the 
chart, 1830 and 1884, the cost in money for manufacturing a 
coarse cotton fabric has been reduced more than one half. In 
the same period, the rate of profit on each dollar invested, which 
sufficed to induce the construction of the factory, has also been 
reduced one half. In the same period, each unit of the machinery 
itself has become so much more effective, that one operative will 
perform three and a half times the work in eleven hours that one 



THE RATE OF WAGES? 1 25 

operative could perform, from 1830 to 1840, in thirteen hours. 
Thus it has happened that, while capital may now be satisfied 
with one quarter part as much money derived from the sale of 
the product as it formerly secured, wages have doubled per day, 
and more than doubled per hour, in the period named. From 
1830 to 1840 inclusive, it was necessary to take fourteen per 
cent, from the gross sales of goods in order to pay ten per cent, 
on the capital of the factory. From 1880 to 1884 inclusive, six 
per cent, of the gross sales Avould suffice to pay ten per cent, upon 
the capital, while six per cent, profit would now be more nearly a 
normal rate. 

In these charts I have treated the art of spinning and weaving 
cotton by machinery, upon what are called the self-acting mules, 
spinning-frames, and power looms. We may contrast the con- 
ditions of the same art, at the present time, in different parts of 
this country. In the heart of this country, upon the hill-sides 
and in the valleys of the great Allegheny region, in Virginia, in 
Kentucky, in Tennessee, and in the Carolinas, there is a popula- 
tion of two millions or more of people, who are even to this day 
chiefly clad in homespun fabrics, of which the yarn is spun upon 
the hand spinning-wheel, and woven upon the hand-loom. These 
people have been kept in isolation by the surrounding pall of 
slavery, until a very recent period. Their country is now being 
opened by railroads, and the art of making homespun fabrics will 
soon be a lost art among them. The capacity of five of these 
persons — to wit, two carders, two spinsters, and one weaver, in a 
day of eleven hours, is eight yards of coarse fabric, heavier, but 
of more open texture, and therefore more quickly woven by 
machinery than the standard sheeting. Five operatives in a 
modern factory would spin and weave one hundred-fold as much, 
or eight hundred yards a day. But we will limit the comparison 
to the actual product of standard sheetings, and we will as- 
sume that the home spinners could make eight yards of standard 
sheeting in a day. This would give them 2,400 yards as the pro- 
duct of a year, against 140,000 yards in the northern factory. 



126 THE RATE OF WAGES. 

The cost of spinning and weaving the standard sheeting in the 
northern factory in 1883 was 1.08 cents per yard. If the south- 
ern operatives were obliged to sell their product in the open mar- 
ket at the same rate of wages — that is, at the wages which could 
be derived from 1.08 per yard, the total earnings of the five in 
one year would be $25.92, or a trifle over $5.00 each. If they 
were content with the profit on each yard which yields to the 
northern capitalist ten per cent, a year, it would be .43 of a cent 
a yard, or upon 2,400 yards $10.32. The total wages and profits 
of the five southern operatives, working by hand for one year, at 
the standard of cost and profit of the northern cotton-mill, would 
therefore amount to $36.24. On the other hand, in order that the 
earnings and profits of the southern operatives should be equal to 
those of the northern operatives and owners of the factories, it would 
be necessary that the homespun fabric should sell in the open mar- 
ket at about ninety cents a yard. It therefore follows that the 
high wages of the northern operatives are the result of the low 
cost of production, and that if the southern people now engaged 
in the art of homespun work can find other work to do, in dealing 
with the abundance of timber, in saving the wild fruits, in agricul- 
ture, or in the many other branches of work which their climate 
and soil open to them, but which are not open to the inhabitants 
of the Northern States, they will save both time and labor by an 
exchange of product, and by becoming inter-dependent, rather 
than by remaining isolated and independent. And this is what 
is now occurring. As soon as the incubus of slavery was removed 
and an exchange of products between the two sections of the 
country fairly began, each found that it could serve the other and 
and that slave-grown cotton was no longer king. 



APPENDIX III. 



In order to test the rule of the advance in the rates of wages 
which accompany improved methods of work and the substitu- 
tion of machinery more or less automatic for hand work, I have 
compared the wages of two branches of industry employing men 
almost exclusively in special arts requiring a high degree of skill, 
to wit : the manufacture of pianos and the manufacture of edge 
tools. 

In one piano factory of the highest reputation the rates of 
wages of five classes of workmen averaged 

In 1843 ........ $562 per year. 

In 1880 824 " " 

In another larger factory, the rates of wages of twelve classes 
of workmen have been as follows : 

1853 . . . . . . . $11.33 per week gold. 

i860 . 12.23 " " " 

1866 ....... 14.75 " " currency. 

1872 . 18.00 " " " 

1878 14.66 " 

1880 17.50 " " gold. 

In one establishment making table cutlery, eight classes of 
workmen averaged 

1859 $1.50 per day. 

1880 2.15 " " 

In another on edge tools, ten classes of workmen averaged 

1850 • . . $1.60 per day. 

1880 2.26 " " 

In these examples the law of increasing wages is demonstrated, 
but there is no such unit in these arts as the standard sheeting, 
and I am unable to show how much the ratio of profit has di- 
minished. 

127 



128 THE RATE OF WAGES. 

In fact, no other standard can be found like the standard sheet- 
ing, as it has been manufactured in precisely the same way since 
it was first introduced more than fifty years ago. 

Even the statistics of the cost in money of the standard sheet- 
ing fail to show the true progress of the operatives. In 1830 and 
1840 the machinery was much less automatic than it is now, and 
its operation called for a high grade of intelligence. From 1830 
to 1850 the larger portion of the factory operatives were well-bred 
American women, graduates of the common schools, capable of 
writing the articles in the Lowell Offering. But to them the 
factory gave opportunity for progress, even though the hours of 
work were 13 to 14 per day and the work itself was arduous and 
continuous. The operatives who now earn nearly twice as much 
per day of 10 to 11 hours and more than twice as much per hour 
are, through no fault of their own, less instructed and less 
capable of doing work which requires versatility and individual 
capacity. They are mostly foreign-born. American women have 
gone up into more congenial employments at higher wages, which 
have been opened to them by the application of machinery to 
many arts which were mere handicrafts a few years since, fnd 
they have thus made room in the textile factories for the Cana- 
dian, Irish, English, and German immigrants, who now constitute 
the greater portion of the operatives. 

Yet it will be observed that notwithstanding all these changes 
in the quality of the operatives, the improvement in the quality 
of the machinery has caused the share of the laborer to increase 
as steadily as the share of the capitalist has diminished ; and this 
progress has continued in spite of all the chances and changes of 
meddlesome legislation. 



APPENDIX IV. 



Since this treaties was completed the invaluable report of the 
statistics of labor in Massachusetts for 1884, compiled by Carroll 
D. Wright, has been published. 

It gives me another opportunity to prove the accuracy of my 
deductions. 

In my treatise I worked from an a prioi'i estimate of the 
value of the total product of the United States. 

I deduced a value not exceeding ten thousand million dollars 
in the census year ending June 30, 1880, by estimating the sev- 
eral crops in quantity and in money. First. — By converting that 
portion of the wheat crop which is consumed in the United 
States into bread, and a large portion of the corn into meat 
ready for final consumption, and to this secondary or final 
form I applied the average retail prices. I also ascertained 
as nearly as possible the ultimate value of dairy products and the 
like. Second. — I converted the known quantity of textile fibres 
consumed within the limits of the United States, into fabrics, and I 
then estimated these fabrics at their value in finished clothing at 
the average prices which are charged by shopkeepers. Third. — 
I converted the known production of metals into machinery and 
other forms ready for final use, and valued them. Fourth. — I 
valued the timber product as furniture, dwelling-houses, and the 
like. Fifth. — I converted the sum of our imports into a value at 
its final point of consumption by estimating the cost of distribu- 
tion and by other similar methods. 

Of course this method is one which could not be made abso- 
lutely correct, especially by a private person working only in the 
intervals of active business. The conclusion was warranted in 

129 



I30 WHAT MAKES 

my own judgement by deductions from such facts as I could as- 
certain. I should not however have vent.ured to make use of this 
estimate in a scientific treatise, except its conclusions could be 
sustained by induction from the facts taken in detail. 

By dividing my final estimate by the ascertained number of 
persons who were engaged, my a priori conclusion was that the 
average group of three persons, there being one person occupied 
for gain including the administrative as well as the executive 
force in each 2.90, would come into the possession of substance 
not exceeding in value $523, from which sum all profits, taxes, 
and wages must be derived. 

Upon a further analysis, a subdivision of this average sum 
which included ten per cent, estimated to be consumed directly 
upon the farms without going into the commercial stage, I found 
reason to assign to each one of those engaged in the work of 
administration, that is in the mental rather than the manual work, 
an income averaging between $1,000 and $1,100 a year, which 
being deducted left an average to each person engaged in the 
actual executive work of the country of between $430 and $450 
a year. 

It being assumed that each one of the latter class represented 
^tW persons, each person could enjoy only what $147 a year 
would buy, or in the last analysis what 40 cents a day will buy ; 
that is to say, if my estimate were correct, each member of a work- 
ing man's family must find shelter, subsistence, clothing, and fuel 
on what 40 cents a day will buy, because such is the measure of 
the total product after setting aside five per cent, as the annual 
profit of the capitalist, and five per cent, more representing the 
small savings of the working people. 

In other words my deductions a priori were, that the average 
share of the total product falling to each woman and child in the 
United States in the census year, including the domestic con- 
sumption of farmers' families, could not exceed what 55 cents a 
day would buy. Of this sum I assumed that 5 cents worth would 
be the domestic consumption of the agricultural population, leav- 



THE RATE OF WAGES? I3I 

ing 50 cents a day as the average to each from that part of the pro- 
duction which was bought, sold, or exchanged. Five per cent, or 
2\ cents a day set aside as the profits of capitalists, and five per 
cent, more or 2\ cents a day as the savings of the people, left 45 
cents per day to be divided among the working people and the 
administrative force. Again subdividing this, and the apparent 
share falling to the family of each member of the administrative 
force seemed to be 90 cents to $1.00 per day, leaving to each 
member of each working man's family 40 cents. 

All these computations were antecedent to any examination or 
test by consideration of actual rates of wages. They were de- 
duced as the necessary result of the division of a total annual 
product estimated by entirely different methods than by compu- 
tation of actual wages. 

If, then, 40 cents a day be the average of the whole country, 
the proportion falling to the agricultural population, especially of 
the South and parts of the West, would be less. The proportion 
falling to the manufacturing population of the North would be 
greater. What then were the facts ? 

I have shown how far these figures coincided with the statistics 
of the average wages given in the United States census, and now 
have the satisfaction of comparing them with the facts elicited 
by Mr. Wright in the manufacturing State of Massachusetts. 

Omitting common laborers, domestic servants, and the like, he 
has ascertained the average income of all persons engaged in 
various branches of manufacture to which machinery is applied 
in largest measure, or which require special skill. The list of oc- 
cupations comprises the making of agricultural implements, of 
tools, boots and shoes, clothing, textile fabrics, furniture, persons 
engaged in the building trades, in the making of liquors, ma- 
chinists, printers, makers of wooden-ware, and some other minor 
branches. 

He finds the average wages of these persons in 1883, when they 
were somewhat higher than in the census year, to have been 
$10.31 per week, or $536.12 per year. 



132 WHAT MAUDES 

It will be observed that this list does not include the domestic 
servants, common laborers, or persons engaged in agriculture, 
even in Massachusetts itself, whose wages would bring down the 
average of the whole if they were included. 

His results, even to this extent, may therefore be considered as 
fairly corresponding with the deductions made by myself, but the 
most conclusive proof of the accuracy of ray deductions will be 
found in the treatment of what he calls the " budgets " of nine- 
teen selected families assumed to represent the average of skilled 
workmen ; the expenditures of 400 families having been analyzed 
in the preceding year with which these " budgets " correspond. 

These families comprise ninety-nine persons, of whom forty-one 
are engaged in some kind of gainful occupation — /. e., earning 
wages. Each working member of this small force therefore repre- 
sented a group of 2.17, as against the average of 2.90 in the whole 
country. The average income of each one of these persons was 
$372 a year, somewhat less than the average which I have as- 
signed to each person in my estimate, but when we convert the 
$372 per year into so much a day for each person, the result 
gives forty-seven cents a day, in Massachusetts, in arts conducted 
mainly by machinery, against my estimate of forty cents for the 
average of the whole country, the group 2.17 being smaller. 

It therefore follows that by every method of computation, and 
by every test which can be applied, my deductions are sustained. 

It appears that even in the most prosperous State, the average in- 
come on which each person must subsist, find shelter, pay taxes, and 
make savings, even in arts requiring a high grade of skill, is less 
than fifty cents a day. If half the people of this country must 
live on what fifty cents a day will buy, the other half must live 
on what thirty cents a day will buy, since forty cents is the meas- 
ure of all there is which can be assigned to their support ; yet, 
at this rate, Mr. Wright reports his conclusion that the standard 
of living of the workingmen of Massachusetts is in the ratio of 
1.42 to I in Great Britain. He does not treat the condition of 
'European continental laborers, but all students are well aware 



TH& RAT^ OF Wages 9 133 

that the British workingman is better than his continental com- 
petitor in similar ratio. 

The conclusion which can be drawn from these data, in my 
own judgment, would be this : Great Britain produces within 
its own limits but a moderate portion of the food of its people, 
and scarcely any of the materials used in its manufactures with 
the exception of iron, and is therefore forced to import by far 
the larger portion of its materials, and a large part of its food, and 
to pay the cost of freight thereon. 

The various elements of her manufactures — in moderate part 
produced at home, and m large part brought from other countries 
— are then combined into an annual product of a certain value, 
out of which rents, profits, taxes, and wages must be derived. 
Under present conditions the remainder over, left to the British 
workingmen, as compared to the Massachusetts workingmen, is in 
the ratio of about two to three, /. e., the Massachusetts working 
man or woman is fifty per cent, better off than the British working 
man or woman. 

Upon the continent, where the resources of the several countries 
themselves are even less in ratio to the number of persons to be 
sustained, the value of the annual product is less in proportion 
than it is in Great Britain ; while the labor exerted is very much 
greater than it is either in Great Britain or in in this country. 
Consequently the remainder over, after paying for the enormous 
cost of standing armies, and after being subjected to the with- 
drawal of one man in twenty from the productive work, is less 
probably by one half than it is in this country, and by one third 
than it is in Great Britain. 

As a natural consequence large masses of people in Italy, in 
Germany, and in some parts of France and Belgium, barely exist 
upon the edge of starvation. 

It seems almost a necessity to bring this matter down to the 
unit of the individual, in order that the people dwelling upon the 
continent of North America may in some measure comprehend 
the advantage of the position, and of their freedom from vested 



i34 ^^A ^ MAKES 

wrongs under which their fellows are suffering in countries of so- 
called older civilization. 

Another branch of the subject to which I have as yet given 
little attention, needs to be explored, in order to show that 40 
cents worth is enough for moderate comfort, if it is used with 
moderate intelligence ; for instance, the jail of the county in 
which I live is admirably conducted. The prisoners are adults, 
boys and girls being sent to reformatories. The food of these 
prisoners consists of bread made from the best flour, and the 
meat consists of the remainder of the carcass of the best beeves 
and other animals after the fine cuts have been taken off for the 
first class hotels. These persons are served with a moderate 
quantity of tea, with rye coffee, with such vegetables as are suit- 
able ; in short, with an abundance of food, and it is probably 
better cooked than in the average family of common laborers, 
and yet the prime cost of the provisions required by each pris- 
oner, delivered at the jail, is but a trifle over 12 cents per day ; of 
course it is prepared by prisoners. 

Now it appears, both from Mr. Wright's investigations arid 
from those of Dr. Engel, of Berlin, that the cost of subsistence 
of a workman's family, earning from $300 to ^750 a year, is 
sixty per cent, of his whole expenditure. 

If, then, an abundant supply of nutritious food for an adult can 
be procured in Massachusetts at a cost of ^50 a year, and the 
same economy could be used in respect to other items of expense, 
an income of $90 a year to each person would suffice for whole- 
some conditions, while $100 a year would amply provide for the 
excess of rent which working people in Massachusetts are obliged 
to pay above their competitors in England. 

This latter assignment of $100 a year to each person, — which 
was the average of 20 or 30 years ago, — would be a fraction un- 
der 28 cents a day. There can be little doubt that the rate of 
wages has advanced in this ratio, /. e., from 28 to 40 cents per day 
for each person during the last twenty years, and that each dollar 
has also greater purchasing power. . ,_ 



THE RATE OF WAGES? 13^ 

If, then, the margin be narrow and if want treads still close 
upon the steps of welfare — courage may yet be taken as to the 
future under the application of the law of diminishing profits and 
increasing wages. 

In conclusion, at the risk of repetition, let me again call atten- 
tion to the fact, that in order that each person of the present 
population of the United States, computed at this date at fifty- 
eight million, may enjoy five cents worth per day more than the 
average assumed in this treatise, it would be necessary that the 
production of each person should be increased $18.25 P^^ year ; 
or, in other words, that each person in a group of three engaged 
in gainful occupation should produce $55 worth more than each 
one now produces, and find a market for the increasing product 
without diminishing prices. 

Now, $18.25 P^^ person, multiplied by fifty-eight million, gives 
an aggregate of $1,058,500,000. This sum is twice and a half the 
value of the present wheat crop of the United States, ten times 
the value of the pig-iron produced in the United States, about 
double the value of all the textile fabrics ; or, to put it in another 
way, the people who are now at work, numbering at the propor- 
tion which the working force of the census year bore to the 
whole, about twenty million, must add to the present product the 
value of our wheat crop, say $350,000,000 ; to the value of our 
pig-iron product, say $90,000,000 ; to the value of all our pro- 
duction of textile fabrics, say $650,000,000, total, $1,050,000,000, 
and must find a market for the sale of the increased product, in 
order that each one of their number may earn fifteen cents a day 
more than they now do, and that each one of a group of three 
may be able to consume more than they do now by what five 
cents a day more will buy. 

In this view of the matter, progress in material welfare is aryi 
must be very slow. 

This problem is commended to all who expect to improve the 
welfare of the people by changes in respect to land tenure, or by 
creating paper money, or " fiat money," or by compulsorily short- 



136 WHAT MAKES 

ening the hours of labor, and by other methods of meddlesome 
interference, by statute, with customs which have been gradually 
evolved during the last two centuries. 

May we not respectfully suggest that such progress can be ac- 
complished only by the advancement of science, beginning in the 
common schools, with manual and technical instruction as well as 
with mental work. 

Increased production and a wider market constitute the only 
sources from which the money can be obtained by which the rate 
of wages can be advanced. 

On the other hand, there must be this increase of production, in 
order that even if the rate of wages is not advanced, each unit of 
the wages will buy as much as it now does. 

The true function of commerce must be fully comprehended in 
order that such an advance may be speedily reached. It cannot 
be reached until the present fallacies in regard to wages have 
been given up, nor until the principle shall be accepted that 
high rates of wages, expressed in terms of money, are the result 
of low cost of labor, expressed in hours or efforts. 

In the great competition under which service for service is 
rendered, those nations which apply machinery to the fullest ex- 
tent, and to the most adequate resources, make the largest product 
at the least cost of labor. 

In their exchanges with what are called the barbarous or hand- 
working states of the world, or with those nations in which ma- 
chinery has been applied to the arts in least measure, they gain the 
most for themselves, while rendering the greatest service to those 
with whom they deal. 

This is the secret of English wealth. 

This is the secret of the higher wages of the English-speaking 
people. 

This is the secret which the people of the United States have . 
yet but half comprehended, because the abundance of their pro- 
duct is so great, that no stress of want has yet compelled atten- 
tion to be given to the science of political economy, and to the 



THE RATE OF WAGES? I'i^f 

methods by which the burdens of taxation can be most easily 
borne. 

This subject is a vast one ; it includes not only the tariff ques- 
tion, but also the much more complex and difficult question of 
local or municipal taxation, in respect to which there is no uni- 
form system or practice in the United States. 

If I have succeeded in calling attention to the fundamental 
principles which must be considered before we can even begin to 
deal intelligently with these vast social questions, I shall have 
accomplished my purpose. 

It will have been apparent to the reader that in this treatise 
and its appendices, two separate lines of investigation have been 
followed. 

In the first place the principle has been laid down that by way 
of, or by force of, competition, there is a tendency in the rate of 
profit, interest, rent, or by whatever name or designation the share 
of the capitalist is defined, to diminish. 

On the other hand, there is a tendency in the rate and pur- 
chasing power of wages to increase. 

These tendencies are subject to variation in short periods of 
time, owing to short crops, war, or other similar causes, but in any 
long period of time they become rules. 

Furthermore, in any country inhabited by a substantially homo- 
geneous people, high wages both in rate and in purchasing power 
are the necessary consequence or result of the low labor cost of 
production. 

This rule will also apply between different countries subject to 
variation arising in the practice of hereditary arts, or from the 
imposition of customs duties and other like causes. 

This rule is also subject to temporary variation — but in a long 
period of time may be considered absolute in its working. These 
positions have been sustained historically and by the citation of 
facts growing out of existing conditions in the United States, and 
they form the main purpose of the treatise. 

The second subject — or division of the main subject as it might 



138 THE RATE OE WAGES. 

perhaps better be called — consists in the attempt to measure the 
annual product of the United States in terms of money, and 
thereby to determine the possible share or remainder enuring to 
those who do the work, by which measure the average rate of 
wages in the United States at a given time or at the present time 
may be established. 

This part of the subject is sustained by such testimony as may 
be available from official documents, but must be considered as 
only approximate in its terms ; suggesting a method whereby these 
facts may be hereafter determined rather than a conclusive trea- 
tise upon present conditions which it would be impossible for a 
private person to work out in an absolutely certain manner. 

It may be readily conceived that the Government Bureau of 
Statistics, or the officers of the next census could make a very 
accurate computation of value of our annual product by first 
ascertaining the value of grain, cotton, metals, timber, wool, and 
other fibres and the like, and then tracing each subject through 
its various conversions to the point of ultimate consumption, as 
bread, clothing, shelter, machinery, etc., etc. — the value of that 
portion exported being very easily computed separately. 

Of course there would be some errors and omissions, but they 
would balance each other, and the result in cents per day per 
person, or dollars per year per family, would be but little affected 
by the sum of all probable errors. 



APPENDIX V. 



My attention having been called to a computation of the value 
of the annual product ©f the census year, which is included in 
the report of Mr. Joseph Nimmo, Jr., Chief of the Bureau of 
Statistics, for 1884, I have requested him to give me the data 
upon which he reached his conclusions in the matter, and I have 
the satisfaction of submitting his letter herewith. 

Bureau of Statistics, 
Washington, D. C, October 21, 1884. 

Dear Sir : — Your letter of the 17th inst. has been received, 
and I will reply as follows in regard to the total value of our 
annual product : 

The estimate of $3,600,000,000 for the product of agriculture 
was given to me by Mr. J. R. Dodge, a year ago, as the result of 
a series of careful investigations, and he firmly adheres to that 
estimate. Mr. Dodge had charge of the census agricultural 
sta^tistics, and I regard him as the best authority in the United 
States upon that subject. 

The following is a foot-note upon this subject, which appears 
in my article on " American Manufactures," contributed to the 
North A^nerican Review, of June, 1883, and is taken from a mem- 
orandum upon the subject given to me by Mr. Dodge : 

" This is an estimate made by Mr. J. R. Dodge, Statistician of 
the Department of Agriculture, and Special Agent of the Census 
for the Collection of Statistics in regard to Agriculture. The 
census gives $2,213,402,564 as the estimated value of farm pro- 
ductions. This, however, does not include the increased value 
of live stock, nor the value of the products of pasturage on the 



X40 WHA T MAKES 

public lands. It also omits to a very large extent products of 
horticulture." 

All the other values, in making up the aggregate, are directly 
from the Census Office ; so that my total of $9,817,900,652 in the 
foot-note on page 40 of my annual report was made up as follows : 

Agriculture ...•,..,, $3,600,000,000 

Manufactures ...,..,.. 5,369,579,191 

Illuminating gas (partly estimated) ..... 30,000,000 

Mining 236,275,408 

Forestry (partly estimated) ...... 455,000,000 

Fisheries .......... 43,046,053 

Meat production and wool clip of ranches (estimated) . 40,000,000 

Petroleum — manufactured product . _ . . . . 44,000,000 

Total (materials out) $9,817,900,652 

I conferred very fully with the Acting Superintendent of the 
Census, Mr. Geo. W. Richards, an exceedingly intelligent and 
able man, who appears to have a thorough understanding of the 
whole census figures. Regarding the total value of the products 
,of manufacture, he stated to me that while there are some dupli- 
cations in it, the omissions amount to very much more. It is 
certain that the values are, on the average, below the actual 
values ; and that there is a considerable amount overlooked ; 
besides, the census did not take into account the products of any 
establishment the value of which products was less than $500.00. 

I have no doubt that the total value of the products of all 
industries was over rather than under $10,000,000,000, perhaps 
in very considerable measure, but of course there are no exact 
data beyond those given in the census. We may safely say on 
the basis of the census data that the total value of the products 
of all industries in the United States was at least ten thousand 
million dollars. 

I am, sir. 

Very respectfully yours, 

Jos. NiMMO, Jr., 

Chief of Bureau. 



THE RATE OF WAGES? I4I 

This ^?feiputation, it will be seen, is almost identical with my 
own, except that Mr. Nimmo uses the expression " at least," 
where I have said that the annual product in the census year was 
" at most," ^10,000,000,000.' 

' It is, of course, impossible to bring such, a problem as this to very exact 
terms by an unofficial investigation ; but if, however, we assume an error of five 
per cent, in the computation of the gross value of the annual product, such an 
addition would be substantially two and a half cents a day to each person, and 
would amount to the gross sum of $500,000,000 a year on the average popula- 
tion of the last four years. 

Such an addition would fully cover the point in respect to which there are nt 
actual data in the census or elsewhere, but which must be treated wholly as i 
matter of observation and judgment, to wit : the steadily increasing proportion 
of prosperous persons who may be economically called the well-to-do, or m 
common speech the forehanded men ; such as prosperous shopkeepers, able fore- 
men in the mechanic arts, farmers whose principal tools are their own brains, 
capable women taking part in occupations formerly controlled wholly by men, 
small manufacturers who own and control their own works, — and the like. In 
the sorting which I have previously made on a broad and general scale, I have, 
perhaps, left no place for this class of persons, but by adding five per cent, to 
the assumed product of $10,000,000,000 in the census year full provision would 
be made for them in the following classification : 

Total production as first computed $10,000,000,000 

Domestic consumption on farms and , domestic .product of 
families which is not exchanged or does not come into 
the commercial product 1,000,000,000 

Commercial product ........ $9,000,000,000 

Share of capitalists, 5 per cent. . . . $450,000,000 

Savings of the people, 5 per cent. . . 450,000,000 

Addition to the capital or wealth of the nation . . . 900,000,000 

Wages Fund $8,100,000,000 



Share of 1,100,000 persons who are assumed to be engaged in 
mental and administrative work, computed at $r,ooo each, 
including 227,210 teachers and scientific persons. This 
class may be subdivided as follows : 

200,000 teachers in the lower-grade schools, scientists, authors, 
artists, young lawyers and clergymen, or other persons 



142 



WIfA T MAKES 



Attention may be called to the proof which is to be found in 
Mr. Nimmo's excellent annual report of the actual and necessary 
preponderance of domestic as compared to foreign commerce. 

It will be very apparent to any one who considers the statistics 

of these classes at $550 — $110,000,000, goo,obo mer- 
chants, tradesmen, officials or others in the higher work 
of administration at $1,100 each — $990,000,000 . . $1,100,000,000 
16,200,000 farmers, laborers, mechanics, artizans, operators, 

clerks, dress-makers, and other wage-earners, $432 each 7,000,000,000 



Total assumed product thus accounted for as above 
Add 5 per cent upon this gross product in order to account 
for the larger consumption of well-to-do farmers, fore- 
men, prosperous country tradesmen or shopkeepers, and 
other classes, of whom there may be one million, and to 
each of whom $500 each above the average might be 
assigned. Such an assignment would give five per cent, 
of the farmers, or 200,000, a cash income of $932 each, in 
place of an average of $432, and would bring 800,000 of 
those who have been classed as tradesmen, mechanics, 
operatives, clerks, etc, from $432 up to $932 each , 



,100,000,000 



$10,000,000,000 



Total 



$500,000,000 
$10,500,000,000 



If any larger product should be assumed it would be difficult to trace it either 
in the form of greater savings or in larger consumption. No evidence can be 
found of any larger addition to capital than has been given, and no trace of 
higher wages so far as the census returns cover rates of wages ; but the incomes 
of what may be called the prosperous middle class, to whose consumption the 
possible additional product has been assigned, are not to be found in any 
statistical returns. 

If such an addition ought to be made, then the average product of each 
person in the census year was 57^ cents per day, and the addition of 2^ cents to 
each person per day is to be added to the previous computation of 55 cents. 

This reasoning is based upon the position taken in this whole treatise, to wit ; 
that the progress of the few is not at the cost of the poverty of the many ; but, 
on the contrary, the ever increasing abundance which has been produced or 
brought forth to the use of men in recent years, may be shared by all classes 
iaccording to the relative capacity, integrity, and industry of the respective 



THE RATE OF WAGES? I43 

of domestic agriculture and manufactures, that only a very small 
portion of the products of agriculture could be imported from 
any other country — mainly consisting of sugar, rice, a portion of 
our necessary supply of wool, and a very few other articles, — 
while of necessity a very considerable portion of agricultural 
products are raised within each State itself. It is also true that 
by far the greatest proportion of the mechanical and manufactur- 
ing arts exist from necessity and not from choice, within the limits 
of particular sections of the country and even in particular States. 
Reference has been made in the body of the treatise to the 
way in which special arts have become rooted or centralized in 
particular places, sometimes without any apparent reason, except 
that groups of population have become habituated to the prac- 
tice of such arts, so that they have become hereditary. Under ' 
such conditions the law of decreasing relative profits and in- 
creasing relative wages can be observed in the clearest manner, 
as well as the rule of high rates of wages accompanying or re- 
sulting from low labor cost of production, because in such places 
all the subsidiary employments have gathered around the chief 
centre, and every possible facility exists for making the largest 
product by means of the work of the least number of persons. 

The interdependence of agriculture and of the manufacturing 
and mechanical arts, and the necessary proportion of each in 
every prosperous State, are proved in a very skilful manner, by 
Mr. J. R. Dodge, the able Statistician of the Department of Agri- 
culture of the United States, by means of a series of diagrams 
contained in the Agricultural Report for 1883, showing the man- 
ner in which the values of farms and farm products are influ- 
enced by the establishment of various branches of the mechanic 
arts and of the lesser manufactures in their immediate proximity. 

members of each class ; provided the functions of the legislators are limited to 
such acts as may leave the principle of competition in the use of land and of 
all its products as free to work out its just results as the protection of the young, 
the ignorant, or the incapable from injustice will permit. 

In other words competition leads of necessity to the most effective and bene- 
ficient system of co-operation among men. 



144 



IVHA T MAKES 



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THE RA TE OF WAGES ? 



145 



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146 WHAT MAKES 

By the courtesy of Mr. Dodge, I am enabled to give his cor- 
rected estimate of the value of farm products for the year 
covered by the census returns. It will be observed that his esti- 
mate somewhat exceeds my own, even though he does not in- 
clude the domestic farm consumption of fruit and vegetables, 
but inasmuch as a very considerable part of the hay and corn 
crops are converted into meat and dairy products, a fair allow- 
ance for this duplication would bring the two estimates almost to 
an exact agreement. 

The great increase both in quantities and in values between the 
years 1859 and 1879 will be observed, but although the farm value 
was greater for the same quantities in 1879 than in 1859 it by no 
means follows that consumers at a distance paid more for grain 
or dairy products ; the advance in prices at the places of produc- 
tion, so far as it can be traced, is less than the reduction which 
was made between those two dates in the charges for moving 
those products by railway from producer to consumer. The ex- 
tension of the railways to new lands first made production and 
sale possible ; then as production increased the reduction in the 
railway charge occurred, so that it has not been until the present 
year, 1884, that any material reduction of price has been felt by 
farmers, and even in this year this reduction has only occurred in 
any great measure with respect to wheat and wool. (See next 
essay on the Railway, the Farmer, and the Public.) 

But this increase of the products of agriculture has been ac- 
companied by an extension of manufacturing and the mechanic 
arts. 

It is, of course, impossible that any community can long exist 
which is exclusively devoted to agriculture, except under a system 
of slavery. The artisan must accompany the farmer almost 
from the beginning of the settlement of any section ; next, or 
almost at the same time, comes the minister, lawyer, doctor, shop- 
keeper, domestic servant, and laborer ; soon after, or in the later 
years, even before the farmer, comes the railway with its em- 
ployes, and presently the factory of some kind, each following a 



THE RATE OF WAGES? I47 

natural order and sequence, except when interfered with by- 
restrictive statutes limiting the freedom of labor as in the days of 
slavery, or indirectly preventing commerce between the States. 

The most perfect example of the working of this law is 
to be found in the rapid growth of various branches of manu- 
facturing industry in the Southern States since the statutes impos- 
ing slavery upon that section were removed. Here was a section 
almost wholly agricultural : its people were dependent upon the 
North even for pots and pans ; for clumsy " nigger " hoes and 
other rude and heavy implements of agriculture, fit only for 
slaves to use ; for wagons ; for all their iron ; and also even for 
hay, corn, and bacon. Yet the moment the burthen of slavery 
was removed, all the arts sprang into existence, — some of them, 
perhaps, prematurely. In many branches of industry the tide 
of commerce is reversed : the largest single tannery in the 
country gets itself established in Tennessee, and sends its leather 
to New York ; Alabama discovers the imperial deposit of iron 
and coal of the world among her pine woods, and sends her 
product to New England ; the mountain section sends its hard 
woods in various half-manufactured forms all over the North and 
West ; and in every direction the interdependence of agriculture, 
manufacturing, and commerce, asserts itself as the natural out- 
come of liberty. 

But in the so-called farming States of the West, the necessary 
and almost simultaneous growth of all the arts of life is most ap- 
parent. As an example of the evolution of industrial society, no 
better example can be taken than the State of Ohio, lying mid- 
way between East and West. Within a generation Ohio was rated 
as almost exclusively devoted to agriculture. Even as late as 
1869 nearly one half of the small traffic on her railways was 
merely throicgh traffic, in which the State itself had little interest. 
In 1883 a vast change had occurred which may be pictured as 
follows : 

Ohio lies midway between East and West. In 1883 it contained 
6,897 miles of railroad, against 3,324 in 1869, In 1869, the actual 



148 " WHAT MAKES 

tons moved over all the railways reporting in the State numbered 
14,559,704, of which fifty-five per cent, represented local traffic 
and forty-five per cent, through traffic. In 1883, 63,683,643 tons 
were moved, of which 66J per cent, represented local traffic and 
only 2,2)^ V^^ cent, through traffic, showing how the local traffic 
gains, both absolutely and relatively. The charge per ton per 
mile in 1869 was 2.446 cents ; in 1883, only .875 cents per ton 
per mile. Graphically the Ohio Railroad traffic may be repre- 
sented in this way : 



1869 




TONS MOVED, 


14»559.704 ™ 












1883 






63. 6^3.643 ~ - 




1869 
1883 




CHARGE P1:R TON PER MILE. 







"The actual freight charge on all the railroads reporting in 
Ohio in 1883 was, in round figures, ^67,000,000. Had this traffic 
been subjected to the charge of 1869 the sum would have been 
^201,800,000. 

" The difference between these two sums is, in currency, $134,- 
800,000 ; in gold, ^89,400,000. Now since two thirds of this 
traffic was local traffic, the saving in rates to the people of Ohio 
since 1869, on their local traffic only, was, in currency, ^90,000,- 
000 ; in gold, $60,000,000." — From " The Railway, the Farmer, 
and the Public," reprinted herewith. 

The saving which ensued in a single year growing out of the 
application of capital to railways, therefore, either added sixty 
million dollars to profits and wages or else it saved as much labor 
as would be represented by that sum in the work of subsisting, 
clothing, and sheltering the people of the State. 

Now what have been the forces that have worked this great 
change ? What caused the railways to be built, and what new 



THE RATE OF WAGES? I49 

conditions have the railways brought into existence ? How do 
these new conditions themselves react in sustaining the railways 
by giving them this extraordinary increase in local traffic ? 

In order to understand this matter fully it would only be 
necessary for an acute observer to compare the relative condi- 
tions of the people of Ohio with an equal number who now exist 
in Eastern Kentucky and Tennessee and in Western North and 
South Carolina under conditions similar to those of a century ago 
in other parts of the country. 

But in the absence of such actual observations we must again 
resort to statistics which prove the beneficent law of interdepen- 
dence as compared to the independence and isolation of the 
mountaineers. 

For this purpose the four principal subdivisions of the census 
should be increased to seven. 

Table of all persons occupied in gainful occupations by the 
census of 1880 : 

Class I. — Persons engaged in agriculture, including farm laborers . 7,670,493 
Class 2. — Professional and personal service, omitting laborers not 

specified . . . . . . . „ . . 2,215,015 

Class 3. — Trade and transportation ...... 1,810,256 

' Class 4. — Pursuits which are mechanic-1 rather than manufacturing, 

according to common custom in classifying them ^ . . 2,397,112 
Class 5. — Pursuits which are of the nature of manufacturing rather 

than mechanical, according to common custom in classifying 

them, by estimate ......... 1,200,000 

Class 6. — Mining and pursuits immediately connected therewith, 

separated by estimate * , , . 240,000 

15,532,876 
Class 7. — Laborers not specified, who are doubtless distributed in 
the service of the various arts or occupations included in the 
last five classes — agricultural laborers having been separately 
enumerated — but doubtless many laborers pass from one to 
another class as occasion may require ..... 1,859,223 

17,392,099 

' Judgments will vary in making this subdivision. I have classified machin- 
ists, for instance, numbering 101,130, as being in the factory division, and I 
have placed milliners, dress-makers, and sempstresses, 285,401, as well as 
tailors and tailoresses, 133,756, on the mechanical side, although much of the 



I50 WHAT MAKES 

Perhaps we may account more fully for the progress of Ohio by 
considering the ratio which each class of occupations of the 
people now bears to the other in that State. 

For this purpose we may sort them according to the census of 
1880. The population in that year numbered 3,198,062, of 
whom 994,475 were engaged in some kind of gainful occupation, 
comprising i in 3.22 as follows : 

Agriculture 399.495 

Professional and personal service ...... 250,371 

Trade and transportation ........ 104,315 

Manufacturing, mechanical, and mining 242,294 

996,475 

The principal subdivisons of the latter class will be found in 

the following lists, and it will be observed that by far the larger 

part of these arts exist in Ohio in the nature of things ; they have 

grown out of the necessary diversity of occupations which has 

ensued from the application of science and invention to all the 

arts of life. 

Tailors, dress-makers, and seamstresses ...... 33,212 

Carpenters and joiners ......... 29,770 

Blacksmiths 14,623 

work of making clothing is now done in workshops which might well be des- 
ignated as factories. These latter classes differ however from textile factories 
in this respect : that workshops for the manufacture of clothing by women are 
apt to be established at centres where large numbers of men are congregated 
who are engaged in other work, as in Chicago and other Western cities in recent 
years. 

If all those whose occupations tend to concentration in factories were classed 
as manufacturing operatives, including clothing factories, hat factories, metal- 
goods factories, textile factories, and the like, the proportion classed as manu- 
facturing would probably be about even as compared to those engaged in the 
mechanic arts — i. e., in round figures : 

Manufacturing ........ 1,800,000 

Mechanical 1,800,000 

Laborers taken over from personal service as auxiliaries in 

these arts, say 400,000 

Total 4,000,000 



THE RATE OF WAGES f 



151 



Iron- and steel-workers . . t 
Painters and varnishers , . . 
Boot- and shoe-makers , . . 
Brick and stone masons and stone-cutters 
Machinists ..... 

Carriage, car, and wagon makers 
Engineers and firemen . 
Butchers ..... 

Cabinet-makers and upholsterers . 
Miners . . . . . . 

Coopers ...... 

Cigar makers and tobacco workers . 
Printers ...... 

Saw-mill operatives . . , 

Millers 

Manufacturers and Officials* Manufacturing Cos 
Harness, saddles, and trunks . , 
Apprentices ..... 

Brick and tile makers , , . 
Tinners ...... 

Bakers ...... 

Cotton, wool, and silk . . . 
Brewers and malsters 
Gold, silver, and jewelry , . 

Wheelwrights . . , 



Unenumerated, or less than 1,000 each 



11.458 
10,964 

10,713 

7.498 
7,020 
5,860 
5,713 
5.615 
5.575 
5.357 
5.297 
4,658 
4,148 

3.919 
3,811 
3,661 
3.525 
3.355 
3.331 
2.983 
1,818 

1.744 
1,260 
1,028 

211,335 
30,959 



242,294 

It needs but a glance over the titles of these manufacturing and 
mechanical occupations to see that, given a considerable area of 
fertile land and an intelligent and free system of agriculture, 
nearly all the other occupations in this list must of necessity fol- 
low or accompany agricultural development ; while most of these 
occupations, especially those of mechanical industry, must not 
only exist within the State itself, but must concentrate in and 
around every populous centre of the State, because the work is 
of such a kind that it cannot be imported from any other place 
except at a greater cost. 

Towns and cities grow — they are not made, — and few men can 
even foresee by a few years where they must exist ; but where 
they have grown they serve the agricultural population around 
them and are served by them. Out of this exchange comes in- 



152 WHAT MAKES 

creased welfare, and both city lots and country farms increase in 
value as the result of the facility which is given by their prox- 
imity for attaining the best conditions of life with the least effort, 
/. e., a less quantity of labor and a greater quantity of products 
resulting in lower cost of production and higher rates of wages. 
The diagrams given by Mr. Dodge furnish a very interesting 
proof of this necessary co-existence in every State, of agriculture 
and the special mechanical and manufacturing arts which give em- 
ployment to the largest number of persons and which must ac- 
company agriculture. 

It will be observed that in Ohio the proportionate occupation 
of the people is as follows : 

Agriculture .......... 41 per cent. 

Professional and personal service . . . . . . 25 " 

Trade and transJDortafion . . . . . . . 10 " 

Manufacturing, mechanical, and mining ..... 24 " 

100 

If we apply this analysis to one of the youngest of our States, 
which is assumed to be devoted almost exclusively to agriculture 
— Oregon — we ag3.in find an example of diversity of occupation 
which proves how necessary all the arts are to any State, even if 
there are no great factories within its limits. 

The population of Oregon in 1880 was 174,768, of whom 67,343 
were occupied in gainful work in the following proportions, or 
I in 2.60 : 

Agriculture ...... 

Professional and personal service 

Trade and transportation .... 

Manufacturing, mechanical, and mining 

67,343 100 

Another example may be found in Kansas, another young 
State, as yet devoted mainly to agriculture : 

Population in 1880, 996,096. Occupied, 528,302, or i in 1.90 (witness the 
very high ratio of workers). 

Agriculture 303.557 • 57.5 percent. 

Professional and personal service . . 50,872 . 9.5 

Trade and transportation .... 103,932 . 20 " 

Manufacturing, mechanical, and mining . 69,941 . 13 " 

528,302 100 



27,091 
16,645 


40.3 per c 
24.7 " 


6,149 
17.458 


9 
26 



THE RATE OF WAGES? 1 53 

In this State the railroad opened the way, or preceded agricul- 
ture, and the true balance of occupations has not yet become 
adjusted, but when families increase and the true balance of 
population is attained the same proportions will doubtless be 
reached as in Illinois and Indiana or other prairie States. 

In the whole United States the proportions were as follows : 



7,670.493 


44 per cen'u 


4,074,238 


23.5 


1,810,256 


10.5 


3.837,112 


22 ,, 



Agriculture 

Professional and personal .... 
Trade and transportation .... 
Manufacturing, mechanical, and mining 

17,392,099 100 

In the great States in which diversified industry has been devel- 
oped most freely and fully, like Ohio, Indiana, Illinois, and 
Wisconsin, the proportions of the occupations of the people 
substantially agree with the average of the whole country ; while in 
the South, where all diversity was forbidden by slavery, a rude 
kind of agriculture was until lately the rule, and the true diversity 
of free civilization is just beginning to assert itself. On the other 
hand, on the sterile soil of the Eastern States, in a climate in 
which indoor or factory occupations are most consistent with 
comfort and welfare, the' manufacturing and the mechanic arts 
assume the preponderance that agriculture possesses elsewhere, 
while what little good arable land there is possesses the highest 
value. 

By these subdivisions of labor the quantity of labor is dimin- 
ished, and the quantity of product is increased ; then, as trans- 
portation becomes less and less costly exchanges cover a wider 
area. Each State, and each section of a State, therefore, takes 
up the work for which its soil and its people are best adapted, 
and in that State or section in which the best conditions are to 
be found, the sum recovered from the sale of its products will 
yield the largest profit and the highest wages, corresponding to 
the low cost in the labor in the work done. 

If each State could be content to work out its just results in 
this way, there would be less contention ; but, unfortunately, the 



154 - _ WHAT MAKES 

representatives of a few very much concentrated interests arro- 
gate to themselves an importance which becomes somewhat lu- 
dicrous when subjected to comparison with others that excite 
little attention. 

For instance, the whole country is now disturbed : commerce, 
both national and international, is adversely affected ; construc- 
tive enterprise is checked ; large numbers of people are thrown 

out of employment, while wages are consequently depressed, 

simply by the continued coinage of light-weight silver dollars 
under the present act of coinage. 

The purchase of silver bullion for this coinage is continued at 
the instance of what are known as the silver-producing States, 
in order to sustain the so-called " silver interests " of the 
country. 

The value of the silver produced during the last few years, 
measured by comparison with the standard of gold has been 
about forty million dollars a year. 

Under an act of Congress, more than half this product of 
silver is purchased by the Treasury in the form of silver bullion, 
and is coined into light-weight dollars, which are not wanted for 
use, and which are stored in costly vaults. The average tax 
which is imposed upon each person for this purpose is a little 
over forty cents a year ; each voter's proportion is about two 
dollars and a half a year. Perhaps the voters of this country are 
too busy to pay much attention to so small a perversion of the 
powers of Congress, or to remedy a wrong that only costs twenty- 
four million dollars a year, and which is imposed upon them in 
order to support a private interest. It may, however, be well to 
assign a ratable proportion of this tax to some of the towns and 
cities of the country, in order to show their share of this 
burthen : 

Sf-Y J^'t^'^y P^y' ^^°"^ $560,000 

Philadelphia ' " ^ 

s^'^^g° : 240.000 

^°^'°" ,. , ' 160,000 

My own httle town of Brookline, Mass., pays about . . . 4,000 



THE RATE OF WAGES? 1 55 

This purchase of silver at the cost of the taxpayers, stimulates 
a product which is not wanted and which it would be desirable to 
leave to the working of the natural laws of trade, in order that 
the true ratio of silver to gold, /. ^., the true value of silver in 
terms of gold, may be determined. This cannot happen so long 
as the United States Government "bulls the market," if one may 
use the slang of the street. This measure is as obnoxious to the 
bi-metallist as it is to the advocate of the single standard of gold. 

If the dangerous nature of our present course cannot be forced 
upon public attention by argument, it may be well to try another 
method. Let us measure the importance of the silver interest, 
so-called, by a comparison with some of the other products of our 
mines and of our agriculture, and for this purpose we will first 
compare the relative importance of the silver mines and of the hen 
yards of the country. 

The census valuation of eggs and poultry was far below that of 
the experts who compile the annual data of our poultry and dairy 
products, but assuming that our hen population has increased in 
the same ratio as our human population, our annual supply of 
eggs is over five hundred million dozen, which at the low price of 
sixteen cents a dozen would be worth $80,000,000. 

The product of what we may call our " hen industry " is there- 
fore twice that of our silver mines, and it is immeasurably more 
important, because the proceeds of the sales a-re enjoyed by the 
least wealthy portion of our farming population, while the pro- 
ceeds of the silver mines have in great measure gone to build up 
a few "bonanza fortunes," or have been wasted in vain 
attempts to increase an excessive and comparatively useless pro- 
duct of the same metal. 

The most competent judge in this country of the cost of silver, 
the owner of the largest silver-ore reduction works in the world, 
(who never owned but one silver mine, in which he lost every cent 
which he put into it,) lately gave me his deliberate opinion that 
every dollar's worth of our present silver product cost the country 
not less than two dollars in gold. 



156 WHAT MAKES 

But let us compare with another metal. Iron lies at the foun- 
dation of all the arts — it is immensely more important than silver 
The producers of iron are struggling under adverse conditions 
with no such purchaser as the United States, of two million dollars' 
worth a month to sustain their market ; but the value" of the 
product of our iron mines is more than double that of silver, and 
may be computed in this year of depression at not less than 
$90,000,000. Why not buy $2,000,000 worth of pig-iron per 
month and store it in some other vaults ? 

Wool, again, is one of our lesser farm products ; it, like silver, 
has been stimulated by legislation to the point of an apparent 
excess of production of those varieties which can be raised in 
this country, so that the price is very low, but the clip of this 
year, which now comes to market mostly in an unwashed condi- 
tion, is yet worth fifty per cent, more than the silver product, the 
clip of 1884 being computed at 320,000,000 lbs., which at 20 cts. 
is worth $64,000,000. Why not buy $2,000,000 worth of wool per 
month at the cost of the tax payers and thus stop the slaughter 
of sheep ? 

The estimates of our dairy products adopted by Mr. J. R. Dodge 
of the Department of Agriculture give the value of milk, butter, and 
cheese at $350,000,000, or about nine times the value of silver. 

But perhaps the impudence of the demand of the silver interest 
can be pictured best by a graphical illustration, which will bring 
the relative importance of the respective products which I have 
cited into clearest view. I will give my own computation of the 
value of the products of the hen yards in 1884 based on the 
census of 1880, and also the commercial valuation of poultry and 
eggs adopted by Mr. Dodge, which are now computed at over 
$180,000,000 per year. 

The parallelogram on the next page, enclosing separate graphi- 
cal comparisons of these several products, represents the value of 
the annual product of 1884 on the basis of the previous computa- 
tions for 1880, estimated at $11,400,000,000. The respective 
values of silver, pig-iron, wool, and dairy products are drawn on 
the same scale as the outer parallelogram. 



APPENDIX VI. 



No treatise upon wages could be considered in any measure 
complete, without some reference being made to the great varia- 
tion in the purchasing power of money. With wages at the 
same or nearly the same rate in the same place, one family 
will thrive upon an income on which another will almost starve. 
The reasons are not far to seek, but in order that the case may 
be fully comprehended, attention should first be given to the ex- 
cellent and varied subsistence which may be procured at an ap- 
parently very small cost. 

To that end I will first submit an analysis of the cost of food 
in a large factory boarding-house which is maintained by Messrs. 
Wm. E. Hooper & Sons, owners of some of the best cotton-mills 
in Maryland. This house was built to meet the wants of many 
women who came to work in the village where they had no rela- 
tives, and who were compelled to board in insufficient quarters, 
sometimes four in a room, or were in other ways subjected to 
injurious conditions. 

As such statements as this possess a permanent value, being 
very difficult to obtain in a reliable form, I will give the cost i.i 
all its detail of the food of these adult women for six months. 



EXPENSE ACCOUNT, JAN. 1ST TO JULY 1ST, Xi 



Groceries. 


• 


AVERAGE PRICE. 




Flour .... 


30 bbls. 


$5.40 


$162.00 


Corn Meal 


245 lbs. 


.05 


12.25 


Buckwheat 


I " 


.05 


•05 


Rice 


80 " 


.06^ 


5.00 


Hominy . 


2| bus. 


1.40 


3-85 


Crackers . 


33f lbs. 
158 


.08 


2.70 



THE RATE OF WAGES. 



159 



Groceries. 




AVERAGE PRICE. 




Sugar 


2,291 lbs. 


$0,073-%% 


$168.74 


Syrup 


69TTr gals- 


•30 


20.79 


Teas . . . 


91 lbs. 


•43 


39-13 


Coffee . 


540 " 


.I2| 


67.50 


Yeast Powder . 


116 bottles 


.12 


13.92 


Candles . 


32 lbs. 


.12 


3-84 


Soap 


1,074 " 


.07 


75-18 


Soda (bicarbonate and 








washing) 


Ii6f " 


.04 


1-75 


Allspice and Cloves 


I " 


.28 


.28 


Nutmeg . 


I " 


I. GO 


1. 00 


Mace . . . 






-15 


Ginger . 


2 lbs. 


.121 


-25 


Pepper . 


i5i " 


.i7i 


2.67 


Mustard . 


I4f " 


.25 


3-70 


Cinnamon 


A " 


•34 


.10 


Flavoring Extracts . 


12 bottles. 


.I2i 


1.50 


Hops 


4 lbs. 


•35 


1.40 


Matches . 


1 gross. 


2.50 


2.00 


Indigo Blue 




2.50 


1. 00 


Salt 


if sack. 


1.50 


2.62 


Vinegar . 


32i gals. 


.20 


6.50 


Saur-kraut . . 


Ibbl. 




11.50 


Starch . . , 


68J lbs. 


.04i 


3-07 




614.44 


Vegetables. 








Potatoes . 


77I bus. 


•49 


37-75 


Corn (in cans) . 


33 doz. 


•95 


31-35 


Tomatoes (in cans) . 


24f " 


.85 


21.04 


Beans 


2o| bus. 


1.25 


25-75 


Peas 


8i" 


1-25 


10.25 


Turnips . 


I " 


• 35 


-35 


Parsnips . 


3" 


•63* 


1.90 


Cabbage . . 


307 head. 


• 07i 


23-79 


Onions 


17 doz. bunches. 


• 25 


4-25 


Radishes . 


253 " 


• Olf 


4-43 


Lettuce . 


330 head. 


.02 


6.60 


Rhubarb . 


109 bdls. 


.04i 


4-63 


. Beets . . 


116 " 


•04i, 


4-93 


Cucumbers 


9^ boxes. 


.75 


6.93 


Cymblings 


3 " 


1. 12 


3-36 


Carrots , , « 


25 bdls. 


.03 


.75 




$188.06 


Fruits. 








Apples . , , 


I bu. 


.63 


.63 



[6o 



WHA T MAKE^ 



Fruits. 

Berries . 
Currants . 
Raisins . 
Prunes 
Fruit Butter 



Meats. 

Salt Meat, Ham 
" " Shoulder 
" " Breast 

Beef, Roast . 
" Steak 
" Soup 
" Corned . 

Pork 

Lamb 

Sausage and Pudding 

Liver. 

Scrabbles 

Tripe 

Lard 



Oysters 
Fish 



Butter 
Cheese 
Eggs 

Milk 

Mince Meats 



1 86 boxes. 
14 lbs. 
II " 
i6i " 
68 " 



652 lbs. 
626 " 
288 ' 

1,034 ' 
1,360 ' 

137 ' 
527 ' 
213 ' 

97 ' 
446 ' 

137 ' 
22 ' 

28 ' 
434 ' 



6,ooi 



4 gals 



462 lbs. 

69" 
264 doz. 
473 gals. 
155 lbs. 



AVERAGE PRICE. 



7C. 

9 



7i 
7 



13c. to 15c. per lb. 
8 " II 
10 " II 
10 

12+ 

9 

10 

lie. and I2C. per lb, 

12 

10 

8 

15 

8 

10 



20c. 

15 
16 
24 
10^ 



$13.02 

1.04 

1. 10 

12.12 

4.76 

$32.67 



209.40 



338.43 

24.66 
11.64 
44.60 
10.96 

330 

2.24 

43.40 

$688.63 

4-44 
26.42 

$30.86 

92.40 

10.35 

42.24 

"3-52 

16.27 

$274.78 



Groceries ...... 


. $614.44 


Vegetables 


188.06 


Fruits 


... 32.67 


Meats 


. . . 688,63 


Oysters and Fish . . . . . 


30.86 


Butter, Cheese, etc 


274.78 



$1,829.44 



THE RATE OE WAGES ? l6l 

Fifty-nine women were boarded six months, an average of 26J 
days each month, which gives 9,292 days' board. The cost of 
food was $1,829.44, or at the rate of igjVV cents per day for each 
boarder. 

The exact number of servants is not given with this short 
term, but is given with the following statement, covering four 
years, 1880 and 1883 inclusive. If the proportionate number of 
servants be added for the six months covered by the foregoing 
details, it would doubtless reduce the cost of food per capita to 
about 18 cents as against 20 cents for the previous four years, 
giving an example of the general reduction in the cost of subsis- 
tence which has occurred in the year 1884. 

Without going into the exact details, the cost of conducting 
this boarding-house for the four years, 1880 to 1883, will next be 
given, and the proportions of the food will be shown by the 
graphical method. (See page 162.) 

It will be observed that the number of days represented by the 
boarders is ........ . 99,456 

To which must be added for the servants . , 17,520 



Total .... 116,976 

which total being divided into the cost of the food, gives a result 
of a fraction less than twenty cents per day. 

Many curious points will be observed in this bill of fare. 

I St. Nearly every one will be surprised at the relative cost of 
sugar, as compared to farinaceous food. This case is not excep- 
tional, — such is a very common almost universal rule. 

2d. The very small use of corn meal as compared to wheat 
flour. The use of corn meal as the principal farinaceous food 
appears to be confined to the black population of the South ; 
next to them the Yankee of New England makes the greatest use 
of " brown bread " and " Johnny cake." It is also apparent that 
two very important and nutritious articles of New England diet 
are wanting in Maryland, to wit : cod-fish-balls and baked beans. 

3d. The quantity and variety of vegetable food, ..■- 



TH^ RATE OF WAGES ? 1 63 

4th. The large proportion which fresh beef bears to all other meat. 

Consideration may next be given to the cost of subsisting 
prisoners in all the jails of Massachusetts. 

These prisoners are served with the best quality of bread ; 
beef which consists of the carcases of beeves of first quality, 
from which the best cuts have been taken for hotels, the remain- 
der of such special stock being purchased on contract ; vegetables, 
tea, rye coffee, sugar, and other articles substantially necessary. 

The average cost of the materials used for food delivered at 
the jails in 1883 was $44.45 per head, or a trifle over 15 cents per 
day for each prisoner. 

But the subsistence of the employes in the prisons is included 
in this sum, and they constitute over ten per cent, of the whole 
number whose food is represented in this cost-statement, while 
their food is doubtless more varied. This reduces the average, 
and in some of the larger jails the economy of material is greater, 
so that the cost per head is even as low as 12 cents a day. 

In the separate prison for women each prisoner is weighed 
when committed and when discharged, and almost all gain in 
weight during their term of imprisonment. 

The cost of food in this women's prison for 1881 was $14,713.04, 
which sufficed for the supply of prisoners, employes, and officials 
for 98,550 days, or a fraction less than 15 cents per day. 

Next we may consider the cost of subsisting factory operatives 
in New England, — male and female. 

I have been able to obtain only one statement from a village 
in Central Massachusetts, as follows : 

COST OF BOARDING 1 7 ADULT MEN AND 8 WOMEN (3 SERVANTS) FOR 
SIX MONTHS, IN 1884. 

Meat and fish $540 

Butter, cheese, eggs, and milk ........ 336 

Vegetables ........... 72 

Flour and meal . . , , . . , , , . 132 

Sugar and syrup .......... 87 

Tea and coffee ........... 54 

Fruit, green and dry ......... 33 

Spices and salt , , . . . .-. ... . 24 

Total , , , , . '•,,,, $1,278 



164 WHAT MAKES 

This sum represents 4,575 days' board at 28 cents per day to 
each boarder. These boarders being principally men engaged 
in arduous mechanical work, it will be observed that the quan- 
tity of food, especially of meat, is large, and the cost cor- 
respondingly high, as compared to the subsistence of women in 
Maryland.' 

On the basis of these and other data which have come under 
my notice, there can be no question that an ample and varied 
supply of nutritious food can be supplied in the Eastern portion 
of the United States at a cost not exceeding 20 cents per day, or 
$1.40 per week, and probably for a less sum in the West, pro- 
vided it is judiciously purchased and economically served. 

I have given the cost of the rations of " hog and hominy," /. ^., 
bacon and corn meal, furnished negro laborers at the South at a 
cost of 50 to 70 cents per week, to which must be added chickens 
raised by themselves (or by others), vegetables (each laborer 
customarily having a garden patch), fish which abound in many 
places, sugar, molasses, and salt. Perhaps $1 a week would cover 
the whole. 

If it is suitable to assume that these three classes, to wit : 

I St. Adult women engaged in factory work in Maryland ; 

2d. Prisoners in Massachusetts jails, mostly adult men ; 

3d. Workmen and factory operatives, male and female, in New 
England, may be taken as exponents of the consumption of food 
necessary to comfortable subsistence throughout the country at 
an average of 20 cents per day, or $73 per year, then the total 
cost of necessary food of the population of the United States, in 
the census year, might be approximated as follows : 

' A very large portion of the students in Harvard University take their meals 
at a "commons" table in Memorial Hall which is conducted by an efficient 
steward, and the actual cost is divided per capita. During the terms of 18S3-4 
the average cost of food per week was $2.59, or 37 cents per day. Preparation 
and service, including steward's salary, brought the charge to each student up to 
$4.12. The cost of the first month of the autumn term of 1884 has been re- 
duced to $3.97 for the whole service. 



THE RATE OF WAGES? 1 65 

Persons 10 years and above, numbering 36,761,607, at $73 

per year $2,683,597,311 

Persons below 10 years, numbering 13,394,176, at $40 per 

year 535. 767.040 

Total $3,219,364,351 

Even this sum would be more than twice the value of all cloth- 
ing made from textile fabrics, domestic and foreign, carpets, 
upholstery fabrics, laces, ribbons, etc., etc. ; with garments, in- 
cluded, also including buttons, tapes, and other materials used in 
garments ; and also including the first washing, starching, and 
packing of shirts or other similar garments when made in facto- 
ries, which items in the case of shirts, cost more than the making 
or stitching ; all of which I have computed at the lump sum of 
$1,500,000,000.' 

But while textile fabrics and garments of all staple or necessary- 
kinds are sold at the least possible margin of profit ; and while 
every scrap of waste is saved ; also while garments, as a rule, are 
worn out by some one before they go to the paper-maker or to 
the shoddy mill to be reconverted, — most articles of food are 
subjected to the greatest waste, either in purchasing, cooking, or 
in consumption. 

The examples which I have taken represent food purchased in 
considerable quantities at wholesale prices, cooked properly and 
with economy, and used carefully with the least measure of waste. 
Yet at this average the value of the food would be $3,220,000,000 
Add the clothing and other textiles . . 1,500,000,000 

Making a total for food and clothing of . $4,720,000,000 

' This lump sum was reached by taking as a basis the census value of all the 
textile fabrics made in the United States, adding thereto the imports, then 
sorting out those which were ready for consumption as they come from the fac- 
tory. The remainder, being materials used in garments, were then computed 
as clothing, by obtaining the average ratio which the value of the cloth bears to 
the completed garments ready for sale. The result must be very nearly cor^ 
rect, and it gives an average of $30 per head of ;^opulation for clothing, carpets, 
laces, ribbons, and other textiles. 



1 66 WHA T MAKES 

which is a httle less than fifty per cent, of the sum of my com- 
putation of the total product of the country, and is over fifty 
per cent, of the total consumption of the country aside from 
additions to capital, estimated at $9,000,000,000. 

But at this ratio food would be only about thirty-three per cent, 
of the whole cost of living. Now it will be observed that Dr. 
Engel, of Berlin, Carroll D. Wright, of Mass., and other fully 
competent authorities compute the ratio of the prime cost of 
food consumed in the families of workingmen at fifty per cent, of 
their income in respect to the thrifty and well paid, but at sixty 
per cent, of the whole income of common laborers or persons whose 
wages are low. Therefore this low ratio is not a true one, and 
the actual price or cost of food is doubtless more than this 
standard and the difference between $3,220,000,000 and a sum 
perhaps fifty per cent, greater is the measure of the waste or want 
of economy in the purchase and use of food. 

No one can doubt that the actual cost of food prepared for 
use in workingmen's families would be on the average either 
twenty-five to forty per cent, more than the standard of twenty 
cents a day in money, in the more densely populated parts of the 
country ; or else, if only twenty cents a day were spent, it would 
fail to yield half as good a subsistence as is obtained in the 
establishments cited, for want of skill both in purchasing and in 
cooking. 

Let it be observed that while it is proved by these statements 
that an ample and varied subsistence ca)i be supplied to adults 
at twenty cents a day, even in the Eastern states which are most 
distant from the fertile plains of the West, no such economy is 
realized except under similar conditions to those cited. But if 
we add only five cents a day on the basis of the census popu- 
lation we must add $912,500,000 to the aggregate cost, and at 
ten cents more we must add $1,825,000,000. 

The former sum, added to the previous computation of $3,200,- 
000,000 at twenty cents a day, would bring the total cost of food 
at the place of consumption up to $4,100,000,000, or twenty-five 



THE RATE OF WAGES? 1 67 

cents a day, which would be still far less than fifty per cent, of 
the commercial product of $9,000,000,000. 

Now these figures may be true or they may be merely vision- 
ary statistics, but they correspond fairly well with the deductions 
of economists who have examined into the conditions of particu- 
lar families. Even if we add $1,000,000,000 to the computation 
of 20 cents a day we still fail to reach 50 per cent, of our com- 
puted commercial product. 

Whether accurate or visionary these computations bring out 
one great fact in the clearest manner, namely, that the greatest 
cause of want in this country is waste. Whoever can teach the 
masses of the people how to get five cents worth a day more 
comfort or force out of the food which each one consumes, will 
add to their productive power what would be equal to one thou- 
sand million dollars a year in value. 

How can this be done ? In my treatise on " The Railway and 
the Farmer " I have given a diagram of the cost of bread in New 
York, showing it to be less than three cents a pound, and I have 
shown that it can be profitably sold at half a cent per pound 
profit, or at six cents for a loaf weighing i|- pounds, if the sales 
are made on a large scale over the counter for cash. 

But the price of bread in Boston in the small shops is five to 
eight cents a pound. 

Fish, meat, vegetables, and fuel, when sold in small quantities 
are subject to as great or a greater advance on the first cost. 
The grave difficulty is to cheapen the distribution of perishable 
commodities. There is no such difficulty in regard to textile 
fabrics, flour, sugar, or other staple articles. 

In the body of my treatise I have made the statement that the 
highest rents are paid in cities for the right to make use of the 
warehouses or shops in which the largest amount of goods can be 
sold at the least possible profit or advance on the first cost. This 
rule applies to every branch of wholesale distribution, and also 
applies to the retail distribution of staple dry goods as well as of 
flour, of sugar, and of a very few other articles of food ; but it 



l68 WffA T MAKES 

seems to have no application to the retail distribution of meat, 
vegetables, fruit or to the conduct of any of the small shops in 
the poorest districts. Far be it from the writer to impute blame 
or fault to the small shopkeepers, bakers, or grocers who supply 
the very poor. Dealing in small quantities, often granting dan- 
gerous credits, and paying rents which are relatively very high in 
ratio to the amount of their possible traffic, their small gains 
necessarily constitute a large ratio, or per cent, on each article 
sold. In this as in other matters, systematic organization, the 
use of a large capital and the custom of making very large sales 
at very small profits must justify the great traders who have 
absorbed so many small establishments. Again, we must revert 
to relative proportions. Out of 17,392,099 persons engaged in all 
kinds of gainful occupation in the census year there were only 
1,810,256 occupied in trade or transportation, or between 10 and 
II per cent.; but in just the measure that this force can be 
reduced will the cost of distribution be lessened. 

One may well study the methods of one of our great retail dry- 
goods stores or shops as an example of what might perhaps be 
accomplished in the distribution of food in the same cities. 

Dry goods, so called, of all staple kinds are distributed at a very 
small advance on the wholesale prices, and it is doubtful if any 
organization could be invented for lessening the cost below what 
it now is. The chief profit of the dealers, as well as the principal 
customs revenue of the Government, is derived from goods which 
depend on their style and adaptation to the passing fashion of 
the season, — or from laces, ribbons, and small wares, while staple 
and useful goods are sold at a fraction above their cost. 

It is, of course, vastly more difficult to systematize the distri- 
bution of perishable commodities, but perhaps it may be done. 

This is the great problem of city life. How shall the rate of 
wages, whatever that rate may be, be made adequate to the wants 
of him who earns it ? 

Lei it be remembered that this rate is the measure of the laborer^ s 
share of all there is produced, but that all there is is IN EXCESS <?/ 



THE RATE OF WAGES? 1 69 

all the wants of our whole population. The rate would suffice for an 
ample subsistence for every ?naji, woman, and child in all our broad 
land, if only the mechanism and the metaphysics of distribution coiild 
be brought within the rules of social science. 

Cannot bread be served to the workmen of Boston at three 
cents a pound, as well as in New York or in London ? 

Cannot the waste heat of the bread ovens be used to stew 
meats and to make strong beef broth to be sold over the counter 
with the bread ? 

Cannot methods be adopted for bringing milk and vegetables 
within easier reach of the poor, who need them most ? 

Cannot as good a subsistence be supplied outside the prisons 
at 12 cents a day as can be furnished within their walls? 

In other words, must an honest man become a thief and be sent 
to jail in order that an ample supply of excellent food may be 
brought to his door at a cost of 12 to 15 cents a day, or one dollar 
per week ? 

The average which I have given is above the limit of a labor- 
er's ration being $ItoV P^^ week. 

Such an average as this for the cost of an ample and varied 
supply of food will appear very small to most of the readers of 
this book, but it is not for such persons that much consideration 
is needed. The case to be provided for is that of the common 
laborer in a crowded city, the measure of whose share of the 
annual product is what one dollar a day will buy, — or perhaps 
one dollar and a quarter, — and upon whose work an average 
family of four other persons may depend, making five in all. 
His week's wages, assuming that he is in constant employment 
at $1.25 per day, will be $7.50, If it be assumed that the five 
members of his family consume the rations of three and a half 
adults only, then at $1.40 per week, the cost of food would be 
$4.90, leaving only ^2.60 for rent, clothing, and other necessities 
of life. Of course such a proportionate expenditure for food is 
hardly to be considered, yet, upon the average determined by the 
investigations of Dr. Engel and Carroll D. Wright, such a man 



170 THE RATE OF WAGES. 

would expend sixty per cent, of his wages, or $4.50 per week for 
food. But then comes the question : How much food does he 
get for his money and how is it cooked after he buys it ? On 
the answers to these latter questions rest comparative want or 
welfare. If common laborers in cities could be supplied with 
food as well and as cheaply as the prisoners in our jails, /. e., at 
$1 per week, then in the case which 1 have assumed food would 
cost but $3.00, and $4.50 would be left for other expenses. 

Cannot the distribution of meat, bread, fish, vegetables, and 
milk be organized and made profitable with large sales at small 
profits, as well as the distribution of calicos, blankets, and petti- 
coats ? Perhaps with a little more risk and a somewhat larger 
ratio of advance on cost because of their perishable nature, but 
yet in such a way as to reduce the present cost of subsistence in 
a very large measure ? 

Lastly, can cooking be taught in the public schools or else- 
where ? 

Cannot a waste of food equal to five cents a day on the aver- 
age be prevented ? Is there such a waste ? If there is, its meas- 
ure is over one thousand million dollars a year. Let him who 
doubts such waste glance at the contents of the dinner-pail of 
the next laborer whom he passes at the noon hour, or take a meal 
with an average laborer's family. 

Upon the answers which may be given to these questions, the 
adequacy of the wages of workmen in cities will mainly depend, 
whatever the rate of their wages in money may be. 

This is but another phase of the question which forms the 
title of this treatise : 

WHAT MAKES THE RATE OF WAGES ? 



APPENDIX VII. 



It may be suitable to assume that the average quantity of food 
served to adult women in a factory boarding-house in Maryland 
is a fair standard of the average consumption of the working 
people of the United States, in quantity if not in kind, and, if 
we apply the ascertained facts in this example by computations 
covering the whole population of the census year, numbering in 
round figures 50,000,000, we may reach an approximate estimate 
of the total value of food at the point of consumption, and then 
by comparison with the estimates of the value of farm products 
at the place of production, made in the Department of Agricul- 
ture, we may approximately test the accuracy of all the conclu- 
sions or hypotheses relating to the cost of subsistence, which are 
made use of in this essay. 

The diagram given on a previous page gives the actual cost of 
the food consumed by seventy-four boarders and six servants, in 
the four years 1880, 1881, 1882, 1883, averaging twenty cents per 
day to each person, in this boarding-house. 

It will be observed that this food was well bought, in consider- 
able quantities at a time, and was economically cooked and served. 

In the following table the proportion of each kind of food con- 
sumed by one person in one year is given in the first column, and 
in the second column the gross sum is given which this would 
represent, if each person in a population of fifty million enjoyed 
the same rations. 

Article of Food. 
Meats (including poultry, fish, and oysters) 
Butter, cheese, and milk 

Eggs 

Vegetables ...... 

Flour and meal ... 



Per Person. 


For 50,000,000. 


$27.70 


$1,385,000,000 


12.18 


609,000,000 


1.85 


92,500,000 


8.75 


437,500,000 


7.64 


382,500,000 



171 



1/2 



WHAT MAKES 



Article of Food. Per Person. 

Sugar and syrup ....... $7.22 

Tea and coffee . . , . . . . 3.16 

Fruit, green and dry . . . . . . 1.85 

Salt, spices, vinegar, etc. ..... 1.67 



$72.02 
Imported, — tea, coffee, most of the sugar, part of 

the fruit and spices, etc. .... 10.02 



For 50,000,000. 

$361,000,000 

158,000,000 

92,500,000 

83,500,000 

3,601,500,000 

«;oi, 000,000 



Product of domestic agriculture .... $62.00 $3,100,500,000 

It is easily proved that the consumption of sugar and syrup by 
these women was excessive in proportion to flour, but their con- 
sumption of meat was less than that of adult men in Massachu- 
setts, as will presently appear ; while children under ten years of 
age would consume less than either, and the very poor or the 
common laborers of the country vv-ould be able to buy less meat 
and sugar, and would depend more on grain and fish. 

All that is assumed in the comparison which follows, of the 
foregoing total with the computed value of the food products of 
agriculture made by Mr. J. R. Dodge, is that the aggregate 
consumption of eighty working women in Maryland is a fair 
standard by which to measure a good and sufficient proportion 
of food for the whole population. 

Before we venture upon this comparison, we may observe the 
cost of the larger ration of each one of the seventeen adult men 
and eight women in Massachusetts, at the rate of 28 cents a day, 
or ^io2j2-4j. per year. This annual ration, when subdivided, was 
as follows, for one person one year or one day : 

Meat and fish 

Milk, butter, cheese, and eggs 

Vegetables 

Flour and meal 

Sugar and syrup 

Tea and coffee . 

Fruits — green and dry 

Salt, spice, vinegar, etc. 

Imported about 
Domestic production 



Per Year. 


Per Day. 


. $43-20 


.1182 cents 


. 26.88 


0737 " 


. 5.76 


.0158 


10.56 


.0290 " 


6.96 


.0190 " 


4-32 


.0118 


2.64 


.0073 " 


1.92 


.0052 " 


$102.24 


28 cents. 


11.24 





THE RATE OF WAGES? 1 73 

If we consider this average expenditure per day, we may find 
that, although its measure is without doubt a large one as com- 
pared to the expenditure for food which is possible to the common 
laborer, especially in cities, and that, even though such a laborer 
should spend as much money he could not get as much for it — 
yet, even when the money is well spent, it will not give any ex- 
cessive quantity, or very extra quality of provisions. 

The laborer who should spend 28 cents per day for food in the 
most intelligent manner, to be prepared at home in the propor- 
tions indicated, could obtain in Boston to-day for iiy'\^ cents, 
about half a pound of good beef, mutton, or poultry ; about 
three quarters of a pound of fair quality of meat ; or one pound 
of coarse fresh meat, salt meat, sausages, or fresh fish. 

TtoV cents spent on dairy products and eggs would give him 
half a pint of milk, 2 oz. of fair butter or \\ oz. of good butter, 
I egg — " shop 'un," — and a scrap of cheese. 

^ToT cents would give him half a pound of good bread, or 
meal and flour equivalent to about one pound. 

^ToV cents would give him between 3 and 4 oz. of sugar ; and 
^TFo cents spent on tea and coffee might give him one cup of 
each per day, or one of either, night and morning. 

This would be the utmost if the money were spent with care 
and intelligence ; whether the money would yield 50 or 75 per 
cent, as much would depend upon the personal capacity of him 
who spent it. The average laborer would probably obtain about 
as much for 28 cents as the Maryland factory operative enjoys 
for 20 cents per day, the food of the latter being well bought. 

These data are entirely insufficient as a basis for rules ; they 
are merely given as an indication of what might be accomplished 
in improving the distribution of food if the Chiefs of the 
Bureaux of Statistics of the several States would adopt a uniform 
schedule and plan for ascertaining the relative proportions and 
cost of the food consumed in the private families of working- 
men and women. When the facts are known the method of 
improvement may become apparent. 



174 WHAT MAKES 

As this average ration is used as a standard, then, counting each 
two children of ten years or less as one adult, the total consump- 
tion of food of domestic production in the census year would 
have been valued at about $3,890,000,000, — but it is hardly to be 
assumed that the average adult person enjoyed as large a ration 
as did these men and women in New England, whose food was 
carefully purchased and served. The average of the Maryland 
women is probably a much truer standard of comparison. 

In each case attention is called to the vast aggregate of the 
value of dairy products and eggs, indicated by both these tables, 
and to the fact that the money-cost of sugar and syrup is not 
less than eighty per cent, of the cost of the flour and meal. Sev- 
eral years since, Avhen the writer had the direct charge of a large 
cotton factory, when sugar was much higher in price, he found 
that the sugar consumed by a large body of French Canadian 
operatives cost more than the flour. 

Counting two children as one adult, and then extending the 
ration of butter, cheese, milk, and eggs in the Massachusetts 
boarding-house to the whole population, the aggregate of this one 
item would have been over $1,000,000,000, at retail prices. 

These statements may seem to possess only a curious interest ; 
but may it not be held that, when special legislation is demanded 
in order to sustain special interests — as in the case of the silver 
product, — some standard of comparison should be established by 
means of which the utter insignificance of the silver production 
of $40,000,000 may be made apparent ? These are retail prices, 
and it is just at this point of final or retail distribution that de- 
basement of the currency works the most malignant fraud. 

One needs only to recall the manner in which shrewd buyers 
availed themselves of the opportunity to buy great stocks of 
goods when the legal-tender notes issued during the war began 
to depreciate, and then availed themselves of the rise in prices 
which ensued to make huge fortunes, to comprehend the result 
which will follow the depreciation of our present currency when 
the light-weight silver dollar, worth only 85 cents, drives gold 



THE RATE OF WAGES? ^ I75 

from circulation. But in the present case this malignant effect 
will be rendered more intense, because there will be no war de- 
mand to stimulate production. Constructive and productive 
enterprise will be reduced to the point of absolute necessity, and 
the rate of wages will be thereby reduced at the very time when 
the money in which wages are paid will lose fifteen per cent, of 
its purchasing-power. 

Such are the consequences of fraud perpetrated under the 
forms of law, and such will be the consequences of the continued 
coinage of silver dollars, if members of Congress continue to 
submit to the dictation of the so-called Silver States, whose 
whole annual product of silver is worth less than half the annual 
product of hens' eggs. 

If reference be now made to the estimate of Mr. Dodge, of the 
value of agricultural products at the points of sale nearest the 
farms, which is what I understand to be the " farm value " so- 
called, we find the product of grain, meat, dairy products, vege- 
tables, and other articles which are used for the food of men, 
estimated at $2,900,000,000 ; but from this estimate corn fed to 
beasts of burden should be deducted, and hay, converted into 
meat and dairy products, should be added. It may be assumed 
that one would about balance the other, and that the net value 
of human food at the farms was as above~stated. 

In the essay on " The Railroad, the Farmer, and the Public," 
I have computed the proportion of food products moved by rail 
at one half the total tonnage. On this basis we must add $200,- 
000,000 for the cost of moving food from producer to consumer. 

Net value of food at the farms ...... $2,900,000,000 

Cost of transportation . . . . ... . 200,000,000 

3,100,000,000 
Deduct exports estimated . . . . , , . 440,000,000 

Remainder $2,660,000,000 

By comparing this sum with the previous computation of the 
value of food consumed, at the place of consumption, we find a 



1/6 WHAT MAKES 

difference of ^440,000,000, which is easily accounted for as 
follows : 

1. Cost of milling grain and barrelling flour. 

2. Cost of slaughtering and packing animals. 

3. Admitted underestimate in the computation of Mr. Dodge, 
in respect to the production of vegetables and orchard products. 

4. Cost of distribution at wholesale. 

So far as the data can be obtained, the difference between the 
two sums would be fairly covered by these items, and the compu- 
tation of consumption therefore fairly sustains the estimate of 
production at farm values if the standard adopted is a true one. 

Attention must however again be called to the fact that the 
food purchased for the Maryland boarding-house was bought in 
considerable quantities, and made to serve its utmost purpose ; 
therefore, a considerable addition must be made for the cost of 
more luxurious consumption of the more prosperous classes, and 
it must be borne in mind that the small purchases at retail for 
single families will give each person a much less quantity of food 
for the money spent, or the same money spent will buy a less 
quantity of food. Hence it may be fairly assumed that the pro- 
portion of the productions of agriculture consumed in the coun- 
try, which bore a value in the census year of $2,660,000,000 at 
the farms, finally cost the consumers at the point of consumption 
about i|4,ooo,ooo,ooo or $4,500,000,000 ; which sum would repre- 
sent an average of $80 to $90 per year, or a fraction less than 22 
to 25 cents per day, for each person of a population of 50,000,000. 
In saving a part of this vast difference which doubtless exists 
l)etween the farm value of food, $2,600,000,000 (with the charge 
cf $200,000,000 for transportation added thereto), and the sum 
paid at retail for the same quantity, is to be found the greatest 
opportunity for economy and for benefit to common laborers, 
especially in crowded cities. 

In this computation I have paid no attention to the conversion 
of grain and fruit into whiskey, beer, and wine, as I know of no 
accurate method of computing the excessive cost of distributing 



THE RATE OF WAGES? lyy 

liquor by the glass. In view of the prime cost of whiskey and 
beer, coupled with the fact that a revenue of about $90,000,000 
is derived from the excise tax upon them ; and also bearing in 
mind the ratio which the price of a glass of liquor bears to the 
cost of a cask, it may be safely assumed that drink bears a ratio 
of ten per cent to the cost of food, or about $400,000,000. 

Upon the basis of these computations, food, drink, tobacco, 
domestic fuel, and light cost consumers $4,500,000,000 to $5,000,- 
000,000 ; clothing, carpets, and other textiles as previously com- 
puted, $1,500,000,000. Total, $6,000,000,000 to $6,500,000,000, 
or $120 to $130 per year to each person, on the basis of the 
population of the census year, leaving $4,000,000,000 to $4,500,- 
000,000 for all other expenses of living and for profits, on the 
basis of a total of $10,000,000,000 to $10,500,000,000 product. 

In submitting this final analysis of so complex a problem it 
might be prudent for the writer to add the customary caveat, 
which would be consistent with his long practice as an account- 
ant, " E. and O. E." — /. e., " Errors and Omissions Excepted." * 

^ A second edition of this essay may be called for. Readers who are in pos- 
session of statements of the cost of food corresponding to the one herein given 
from the books of the Maryland factory boarding-house, will confer a great 
favor on the author if they will send them to him. Address P. O. Box 112, 
Boston. 



CONCLUSION. 



If the principle which is submitted in this treatise can be sus- 
tained, to wit : that by the competition of capital with capital the 
annual product is increased while the relative share of the capital- 
ist is diminished, and that no more can possibly be saved and 
added to the capital of a given country in a normal year, or series 
of years of peace and order, than is necessary to keep land, build- 
ings, machinery, and tools in a condition of maximum efficiency ; 
if it be also true that by the competition of labor with labor, 
aided by capital, the aggregate of products is increased, of which 
aggregate the laborers receive a constantly although slowly in- 
creasing share, both absolutely and relatively, — then it follows 
that progress and poverty have no natural or necessary relation to 
each other under existing customs, or as a consequence of com- 
petition. 

If it be also proven that the measure of all there is produced 
in a given year, when converted into terms of money by bargain 
and sale — in other words by exchange — must be the source of all 
profits and wages, and that whatever this sum may be, it consti- 
tutes the limit beyond which profits and wages cannot go, then 
it also follows of necessity that by so much as one man secures 
more, may some other man have less of what has been produced 
in that year. 

But it by no means follows that the welfare of the one is 
the cause of the want of the other ; there is enough for all, and 
the common cause of want is usually ignorance, unwillingness, 
or incapacity to do the kind of work which is waiting to be done. 
It would not be a pleasant thought to any man to feel that his 
larger share of what there is has been attained at the cost of his 
fellow-man, and such is not the fact. 

178 



THE RATE OF WAGES. 1 79 

How then shall the just man justify himself if he be rich and 
prosperous and if his family each consume far more than what 
40 or 50 cents a day will buy if that be the average share ; or if 
each consume more than his average measure of all that is pro- 
duced, whatever it may be ? 

The only answer to this question is that he must either work 
with brain or hand in such a way, or make such use of the capi- 
tal of which his wealth in part consists, that the g.eneral produc- 
tion shall be increased in greater proportion by means of his 
work than the measure of his own consumption. And this is the 
exact function of the capitalist. In one sense he employs labor 
— but it is quite as true that labor employs him. Just as instinc- 
tively as an army of soldiers recognizes its true leader, does an 
army of laborers choose its own capital. The best workmen 
select the best mill ; the best managers are always chosen by the 
best workmen to serve them and to be served by them. 

When capital under skilful direction doubles the productive 
power of each laborer, and leaves him the larger part of the in- 
crease, personal wealth and common welfare become synonymous 
terms; while, on the other hand, he who wastes but does not 
increase production in any way, however rich he may be, is 
really but a pauper — that is a person who is supported at the 
public cost. 

There is something very merciless in these figures which make 
the rate of wages, and in the face of them the shallow nostrums 
of the greenback party, and of the common ruck of so-called 
"labor reformers" who infest the lobbies of the legislature with 
all sorts of empirical projects of law, become worse than an im- 
pertinence. 

It is true that the measure in money of all there is produced 
and commercially distributed in this country may vary a little 
from fifty cents' worth per day to each person, including all 
profits as well as wages ; or forty cents without profits ; it may be 
a little more, it may be a little less. 

The measure of the savings or increase of capital may vary 



l8o WHAT MAKES 

slightly from five cents a day per capita, which is the proportion 
that I have set aside as the probable amount. 

The measure of all the taxes which are now three and a 
quarter cents a day to each person can be reduced to two and 
three quarter cents and no more. 

Whatever the true averages may be, each of these variations of 
a cent or less would count in millions. 

One cent a day added to the resources of all the people, or 
three cents a day added to the average wages or earnings of those 
who do the work, renders an increase of the national product 
necessary, of over two hundred million dollars' worth a year and 
a market must be found for the increase. 

One cent a day taken from wages and added to savings would 
alter the computed sum of the annual addition to capital from 
one thousand to twelve hundred million dollars, or twenty per 
cent. 

Half a cent a day remitted from our excessive taxation would 
take off one seventh of the whole burden, amounting to one 
hundred million dollars a year. 

On such fractions as these prosperity or adversity depend. 

A margin of only a cent or two a day to each person is all that 
separates national want from national welfare, or rather it indi- 
cates the difference in conditions, because on such a margin of 
profit or loss on the whole traffic of the country constructive 
activity or weary depression may be determined. 

If our population, January i, 1885, shall be 58,000,000, two 
cents a day profit on each person's consumption would be $423,- 
400,000 — a sum of profit which would set every wheel of industry 
into most rapid motion. Two cents a day loss Avould bankrupt 
thousands of merchants and stop more mills and works than are 
even now idle. 

When legislators pass acts by means of which they intend or 
expect to control the course of productive industry and to raise 
the general rate of wages, they may well ask themselves how 
they can add one thousand million dollars' worth to our pres- 



THE RATE OF WAGES? l8l 

<?rft over-abundant production, find a market for the increase, 
and so regulate the distribution of the proceeds of the sale as to 
give each person five cents a day, or each working man or woman 
fifteen cents a day, more than they now enjoy. 

As well might each member of Congress try to add one cubit 
to his stature as to attempt to do this thing — but if members of 
Congress cannot construct they can obstruct. They can divert 
the wage fund of the many to the profit of the few by acts of taxa- 
tion for the support of private interests, as in the purchase of silver. 

At any moment the rate of wages of every man, woman, and 
child now working in the employment of others may be impaired 
by many cents a day, if the coinage of silver dollars of light weight 
and worth only a little over 80 cents is not stopped. The tax 
alone which is imposed in order to buy the silver is but a trifle, 
but the malignant effect of tampering with the standard of value 
is the worst evil that legislators can inflict upon the people. 

The completion of the reading of the proofs of the principal 
part of this treatise happens to fall upon the fourth day of No- 
vember, 1884. Two days from this time it will be announced 
that one or the other candidate for President has been chosen to 
govern the United States for the ensuing four years, together 
with a Congress upon whom the duties of legislation will fall. 
After it shall have been announced " straightway all the people 
will return to their usual occupations, and will govern themselves 
according to their common habit." But their material welfare 
may be greatly affected by the measures upon which this or some 
other Congress must soon act. This Congress will have been 
chosen with little or no regard to the convictions of its members 
— if they have any convictions — upon the great fiscal questions 
which must come before it, and after no adequate discussion 
upon them among the people, yet it will find itself compelled to 
grapple with the problem of the safe method of abating taxation ; 
it must deal with the coinage of silver ; it must face a necessary 
change in the national banking system which will ensue under 
the rapid payment of debt. It must deal with financial prob- 



1 82 WHAT MAKES 

lems of greater difficulty than those in which the reputations of 
the greatest men of England have been made or lost. "Vyith each 
and all of these great problems it will probably deal in a purely 
empirical and inconsistent manner for want of adequate leader- 
ship, and without such party responsibility as is necessary to the 
right conduct of representative government. And as it may deal 
with them may confidence or distrust control events, and may 
wages and profits alike be left free to increase or be gravely 
diminished. 

It will probably happen that such a Congress will accomplish 
little, — nothing, — or perhaps worse than nothing. 

In this event, the election of the next Congress, which will be 
free from the personal issues that have degraded the present 
election, will proceed on the basis of a discussion of measures 
rather than of men. 

When this fortunate period arrives, the true era of reconstruc- 
tion, both North as well as South, will have opened. 

Since the end of the Civil War only the crudest measures have 
been adopted for the reorganization of industry. 

Equal suffrage has been established so far as it can be assured 
by national statutes. 

The restoration of a specie standard has been brought about, 
but whether it shall be a true standard of gold coin or a false one 
of debased silver coin is not yet determined. 

The abatement of some of the most onerous taxes has been 
accomplished, but yet more remains to be done, and the real test 
of political intelligence and of statesmanship is before us, in doing 
this necessary work. 

Under what conditions, whether of apparent general prosperity 
or adversity in this and in other countries, the next Congress may 
be chosen, no one can predict. 

It must be very clear, even to the most superficial observer, 
that the present conditions of an apparent excess of production 
and want of market, in all the nations which have applied ma- 
chinery in the largest measure to the work, whatever their fiscal 



THE RATE OF WAGES? 1 83 

or financial policy may have been, must have been caused by 
forces over which statutes can have little or no effect. 

May it not be that the complete revolution in the methods of 
commerce, which has been brought about during the last twenty 
years by the railway, the steamship, and the telegraph, as well as 
by the application of science and machinery to agriculture, has 
now come to what might be called a culminating point, after 
which the benefits heretofore enjoyed mainly by the producers 
and distributers of the staple products necessary to life are now 
in process of wide distribution among all consumers ? In other 
words, may it not be that under the beneficent law of diminish- 
ing profits and increasing wages a lower plane of prices on a gold 
basis has been reached, which is of a permanent character ? This 
change has, for the time being, disturbed all the existing relations 
of labor and capital, and is destroying many great fortunes, while 
bringing many to whom the struggle of life seemed to be ended 
again to the necessity of arduous work ; but will not the end be 
greater abundance to the laborers who constitute the great mass 
of the people, shorter hours of labor, and less arduous conditions 
of life, — at least among English-speaking people, and especially 
in this country ? 

I have attempted to show how very large a proportion of the 
work of production and distribution of this or of any other country 
must go on, whether the "times " are " good " or " bad." I have 
endeavored to prove that the difference between " good " and 
"bad " times in a nation which is at peace, consists mainly in the 
question whether one per cent, of the population or three per cent, 
of the working force is idle, or whether there is work seeking to 
be done which would give employment to one to three per cent, 
more men than are to be found ready to do it. In other lands, and 
in former times in this country, the full employment of the people, 
or lack of employment, has been a question of abundance or 
scarcity ; but in this country at the present time, as well as in 
1873, "C) suspicion of scarcity has been suggested. An excess of 
production exists, and in the effort to get it into use, the rate of in- 



I §4 WHAT MAKES 

terest is reduced, — what is called " plenty of money " is seeking 
borrowers. This plethora of money is merely our excess of grain, 
timber, coal, iron, cotton, wool, and cloth, seeking consumers. 
The title to this excess is measured in terms of money, and is de- 
posited in banks ; and banks, bankers, and trust companies seek to 
find consumers who will pay interest for its use. That is their 
function : they lend titles to consumable property or quick capital 
measured in terms of money, but the proportion of actual money 
used in these transactions is less than five per cent, of the aggre- 
gate. It is the excess of certain special products seeking to find a 
wider market that depresses the rate of interest. It is not money 
which is so plentiful, although there is enough of that ; it is quick 
capital, iron, coal, cotton, corn, wheat, oil, seeking consumption, 
the title to which is held in trust by banks and bankers, and for 
which they seek borrowers. When a wider market can be found 
for what we call over-production, not only will the rate of wages 
be maintained, but the rate of interest or profit on invested capital 
may also be enhanced. 

This wider market need not be a foreign one, — we have still a 
continent to subdue, wanting only confidence and constructive 
enterprise. 

One per cent, of our population, numbering over five hundred 
thousand workers, who sustain fiteen hundred thousand persons, 
may be waiting to use the iron, coal, and timber, to eat the grain 
and to wear the cloth, but cannot get it. 

Coined money is plenty ; other nations send coin itself with 
which to buy a part of our excess ; but more of the excess re- 
mains, and yet the work of constructive consumption does not 
begin. It is the old nursery tale repeated — the pig won't go to 
the market, the dog won't bite the pig, the stick won't beat the dog, 
the fire won't burn the stick, the water won't quench the fire — and 
so on. 

Why does not the pig go to market ? Whoever can answer 
that question will solve the puzzle of financial crises in times of 
peace and plenty. ?, 



THE RATE OF WAGES? 185 

One reason has been given by the late Walter Bagehot, in one 
of his essays, entitled " Physics and Politics," in the following 
paragraph. 

After speaking of the imitative quality of men, he says : 

" The grave part of mankind is quite as liable to these imitated 
beliefs as the frivolous part. The belief of the money-market, 
which is mainly composed of grave people, is as imitative as any 
belief. You will find one day every one enterprising, enthusiastic, 
vigorous, eager to buy, and eager to order ; in a week or so you 
will find almost the whole society depressed, anxious, and want- 
ing to sell. If you examine the reasons for the activity, or for the 
inactivity, or for the change, you will hardly be able to trace them 
at all, and as far as you can trace them, they are of little force. 
In fact these opinions are not formed by reason, but by mimicry. 
Something happened that looked a little good, on which eager, 
sanguine men talked loudly, and common people caught the tone. 
A little while after, and when people were tired of talking this, 
something happened looking a little bad, on which the dismal, 
anxious people began, and all the rest followed their words." 

There could be no more complete example of this imitative 
habit than may be found in the fluctuations in railway construction, 
which have occurred during the last twenty years in this country. 

As soon as the war ended railway construction began ; it was 
pressed to the utmost ; every available man was set to work. 
"Something happened that looked a little good." Every san- 
guine railway promoter, honest or dishonest, " talked loudly, and 
common people caught the tone." Thus it went on until 187 1, 
when over 400,000 men were employed in constructing over 7,000 
miles of railway. Then something happened "looking a little 
bad, on which dismal, anxious people began to talk." The panic 
of 1873 occurred, and in 1875 railway construction had gone 
down to 1,700 miles, giving employment to less than 100,000 men. 
Next came the long struggle to resume specie payment, and in 
1879 "something (the resumption of specie payment) happened 
extremely good." Every one became " enthusiastic, enterprising, 



1 86 WHAT MAKES 

vigorous, eager to buy." Railway construction was resumed, 
factories of all kinds were built, exports of farm products in- 
creased, sales were easy to make, consumption followed close on 
the heels of production. But there were many blunders. Use- 
less parallel railways were promoted and built alongside of an 
adequate existing service, until, in 1882, 650,000 men were en- 
gaged in the construction of 11,500 miles, while over 450,000 
men were engaged in operating existing lines. In 1882 one man 
in every ten of all who were occupied in any kind of gainful occu- 
pation aside from agriculture, was engaged in the construction or 
operation of a railroad. 

" Something happened a little bad." Anxious men began to 
question the pace and to doubt the expediency of some of the 
work ; all men took their tone ; all stocks were affected, good 
and bad alike ; construction fell off to not over 4,000 miles in 
1884, and more than 400,000 men were discharged from work on 
this single occupation. 

There were real causes or reasons for these changes, but their 
effect was exaggerated by over-confidence and too great distrust. 

Almost every mile of the apparently excessive railway con- 
struction which culminated in 1872 has justified its use, if not its 
value to the original promoters, as almost every mile, with the 
exception of a few speculative parallel lines of the apparently 
excessive construction culminating in 1882, will yet be justified. 

We now have 125,000 miles of railway, including as many or 
more through lines East and West, as can be profitably used for 
a long period, but the cross-way and connecting railroad service is 
totally inadequate, while many great States must double their 
mileage within a very few years. It cannot be long before this 
need will be felt ; " something will happen that looks a little 
good " ; confidence will return, and the ready and quick con- 
sumption of our excess will stop all talk about over-production. 

Again, the construction of textile factories has wholly ceased. 
Yet if the construction of railways and other works were going 
on so that all workmen could afford to buy all the fabrics they 



THE RATE OF WAGES? 1 8/ 

need for themselves and their families, every spindle and every 
loom now in existence would be needed. Each branch of work 
waits upon the other ; one stops and blocks the way ; then an- 
other, then another ; but presently the "pig goes to market," and 
the whole procession moves on. 

Each reason for a stop or a start is exaggerated by hope or by 
fear ; few have the instinct to foresee these tides of confidence 
and of distrust, but to them such tides lead on to fortune. 

The habit of expecting greatly beneficial results from legisla- 
tive action, or the reverse, is one of the principal causes of great 
fluctuations in the course of affairs, and from this habit of exag- 
gerating the assumed power of legislative action in business mat- 
ters comes the check to constructive enterprise when grave 
changes in legislation are pending. 

Such changes have now become a matter of necessity and not 
of choice, and while they are pending every man waits the event 
and dares not plan for future enterprise. 

Yet all the conditions of the country are ripe for prosperity. 
There is enough for all, and work is waiting to be done, that will 
soon become urgent, which would entitle every idle man or woman 
to an adequate share of the over-production which now clogs the 
centres of trade. The present Congress has proved itself incapa- 
ble — it blocks the way. Before the next assembles, even the 
doubt which now causes stagnation may have yielded to the 
absolute necessity for constructive work to begin anew. 

Whenever the new start, which cannot be long deferred, is 
made, the vast changes of twenty years, which I have faintly 
tried to picture, will be in full force, and the struggle for general 
comfort and welfare may then be less severe than it ever was 
before in this or any other land. 

It has seemed to the writer that he could dimly perceive these 
beneficent results or promises amid the apparent confusion of 
the statistics, from which he has for many years endeavored to 
wrest their secret. True statistics are but the record of industrial 
history. He whose imagination cannot read what is written be- 



l8B WHAT MAKE^ 

tween their lines or interwoven in their columns, may rest con- 
tent with the narrative of wars and dynasties, or of political 
changes, and may think he knows the true record of events ; but 
can he tell how the people lived and moved, and how these wars 
and dynasties have been sustained. If he cannot, let him study 
what figures can teach to any one who knows how to master them, 
to wit : the industrial history of free nations. The battle is not 
always to the heaviest battalions, but to the people who can 
sustain the battalions longest. It is the commissary general who 
wins, without whom the master of the ordnance would be power- 
less. In the battle of life it is the same. If there were no 
prophecy of the future in this work, these computations would have 
no meaning, and the close study of the disclosures of the census 
would not be worth the time devoted to them. 

I have ventured to call this a treatise upon " The Mechanism 
and the Metaphysics of Exchange." 

The second term of this title may be most fully justified by a 
very slight consideration of the fleeting nature of capital : " All 
things have been others — all things will be others." 

The term " fixed capital " when applied even to the most solid 
and substantial industrial works is yet a misnomer. There is ab- 
solutely nothing in the shape of productive capital which has 
any long duration among men. 

The city warehouses, only thirty or fifty years old, fail to meet 
the need of modern commerce, except they be so completely re- 
constructed as to become almost wholly new. There is nothing 
left of the factory of fifty years ago, except a part of the founda- 
tion and the wheel-pit ; and in that fifty years the whole of the 
machinery has been changed once, twice, or thrice. 

The modern mechanic would scorn the tools which his father 
used, and would hardiy be able to obtain a living by their use. 

Of all the work which has been done by men to promote the 
exchange of services and the distribution of products, there is 
nothing permanent except the opening of the ways and the body 
of the laws. 



THE RATE OF WAGES? 1 89 

It is safe to say that in one, or at the utmost two, generations 
every productive instrumentality now in use, except the opening 
of the ways, will be almost wholly without value because it will 
have been superseded by better mechanism ; therefore no treatise 
upon existing facts would be worth compiling if it did not give 
the greatest prominence to the metaphysical side of social science, 
and did not bring the imagination into play in forecasting the 
future. 

The only bequest which one generation can give to the next 
must therefore be such development of the capacity of each indi- 
vidual as will enable him to grasp the opportunity that a free 
government may assure him, to work out his own material welfare 
by means of the mechanism which may be in use during the term 
of his own working life. 

A true study of the Mechanism and of the Metaphysics of 
Exchange therefore is a true study of the History of Nations, 
and when a commercial history, even of the English-speaking 
people, is written in the way that it ought to be written, it will 
give us an insight into the one fact more important than all the 
rest, when it tells us how the masses of the people got their liv- 
ing — or, in other words what made the rate of their wages — amid 
the turmoil of wars, the contest of dynasties, the contention of 
creeds, and the struggle of the masses to overcome the privileges 
of the few when they had ceased to be founded on services ren- 
dered to the many. 

For such a work as this might be, the compiler of this treatise 
can only prepare some of the materials affecting this country. 

The recent publications of Prof. J. E. Thorold Rogers on 
" Work and Wages " for the last six hundred years, the " Growth of 
English Industry and Commerce " by Prof. W. Cunningham, and 
other English works, together with the investigations of Mr. 
Robert Giffen, cover a large portion of this ground in England. 

EDWARD ATKINSON. 
Brookline, Mass., Nov. 4, 1884. 



WHAT IS A BANK? 

WHAT SERVICE DOES A BANK PERFORM? 

/i LECTURE GIVEN BEFORE THE FINANCE CLUB OF HARVARD UNIVERSITY, 

MARCH, 1880 

By EDWARD ATKINSON 



igx 



Notice. — This tract is specially for the Active and Cooperating Mem> 
BERS of the Society, and is not for general sale. If members aesire any 
additional copies they will be furnished in any quantity at the rate of $10.00 
a hundred, on application to the Secretary, or to G. P. Putnam's Sons, of 
New York, or Jansen, McClurg & Co., of Chicago, 111., the publishing agents 
of the Society. 

Respectfully, 

R. L, DUGDALE, 

Secretary. 



igs 



BANKS AND BANKING. 

A LECTURE DELIVERED BEFORE THE FINANCE CLUB OF HARVARD 
UNIVERSITY, MARCH, 1880. 



Public attention is very much devoted to the question 
of transportation. The importance of railroads and steam- 
ships is apparent to all, and every method that can be de- 
vised to promote the extension of their lines of trafHc 
receives attention. From the dawn of history, commerce 
has been the measure of human progress. Upon the 
ancient caravan-routes of the Far East, over the Roman 
roads of a later period, across unknown seas, and by devi- 
ous ways, commerce has from age to age extended its be- 
neficent function. Even when nations have attempted to 
isolate themselves, by enacting excessive duties upon im- 
ports, the '' fair trader," as the smuggler used to be called, 
has rendered the attempt of no avail. Men will exchange 
product for product, because there is no other way by 
which even a moderate degree of material welfare can be 
attained. 

But in this, as in almost all branches of investigation, he 
who limits his thought or study to the purely physical side 
of the question will be misled. 

In this apparently most material of all questions, how to 
subsist the human body, the work that is abstract or im- 
material is of such essential consequence that railways, 

193 



194 BANKS AND BANKING. 

steamships, and canals would be shorn of more than one- 
half their beneficent power if not rightly coordinated and 
worked in perfect harmony with instruments of distribution 
of a purely abstract, or perhaps we might say metaphysical, 
order. In this category come the operations of the bank 
and the banker. 

But before we begin the discussion of the function of 
banks and bankers, of bills of exchange, bank-notes, and all 
other instruments by means of which the title to commod- 
ities is passed from one man to another, while the things 
themselves are being carried over the railway, it becomes 
necessary to give precision to our language, and to define 
the meaning of the words that we must use. 

I am satisfied that a vast deal of bad legislation would be 
avoided if the graduates of high schools and colleges had 
more complete command of the English language, and more 
fully comprehended the exact meanings of common English 
words. 

Before I can begin to consider the subject of banking, it 
first becomes necessary to define the word money. I shall 
assume that any young man who has had sufficient intelli- 
gence to pass the entrance examinations of Harvard Uni- 
versity will know enough of the functions of money, and the 
qualities which it must possess in order that it may be en- 
titled to the name, to warrant me in excluding stamped 
pieces of irredeemable paper, of late proposed to be issued 
by the government under the name of " fiat money," from 
the category of true or real money. 

It is sometimes necessary, even for intelligent men, to 
consider the propositions in regard to what is called " fiat 
money," in order to prevent the uninstructed from being 
cheated by knaves, or misled by those whose intelligence 
on other subjects makes one hesitate to call them fools, but 



BANKS AND BANKING. I95 

who must be classed among persons endowed with a kind 
of limited or perverted intelligence, for which the dictionary- 
has not yet provided a suitable name. It is unfortunate 
that there should be even a few men among us whose in- 
fluence has been established in the conflict with the slave 
power through which we have lately passed, who do not 
perceive the baleful character of the measures which they 
advocate. We could well spare them if they would mi- 
grate to the country which Boccaccio describes as the 
" Land of Mendacity," where they " use only paper money." 

For the purpose of this lecture, without entering upon 
the history of money, I will limit the meaning of the word 
to the pieces of coined gold and silver used by most nations, 
under various names. Therefore, for the present, when I 
use the word " money," I shall mean gold or silver coins, — 
dollars, sovereigns, livres, francs, and the like. True money 
has been made of other substances in past ages, but at the 
present time nothing else is entitled to the name. 

I am well aware that this limitation would not be admit- 
ted by many economists. It would be alleged that a law of 
the land makes the United States notes now in use 'Mawful 
money," as well as "■ legal tender," and that we must there- 
fore accept the definition ; but may not this very fact be 
cited as an example of the danger of corrupting the lan- 
guage ? 

If a word is perverted from its true meaning, it ceases to 
be an instrument of precise thought. 

We have become so accustomed to the perversion of 
the term " money " from its strict application to the coined 
substance rightly so called, and its application to the prom- • 
ises of banks known as bank-notes, or to the promises of the 
nation known as legal-tender notes, as to make it difficult 
even to begin to speak to you on the subject of banking. 



196 BANKS AND BANKING. 

Anotlier great and very mischievous perversion of the 
word "money" is to use it as synonymous with prop- 
erty. 

We define a man's property by saying that he is 
worth a given sum of money, meaning only that his 
property would be measured by, or could be sold for, 
a certain sum. 

It is from such perversions of the word that many men 
have been led to believe that welfare depends upon an 
abundance of money, and that " the times," as we say, are 
" easy " or "hard," just in proportion to the abundance or 
scarcity of money. 

What is intended by the phrases " money scarce " and 
" money plenty," is more apt to be " capital scarce " and 
" capital plenty ; " but there are also hard times when both 
money and capital are very plenty, and the real cause of 
adversity is that " confidence is scarce." We have lately 
passed through such a period. 

One most potent cause of want of confidence is when 
the instrument used to serve as money is not true money; 
irredeemable notes forced into use by an act of legal tender 
are of this order. The more abundant such base or forged 
money, as may call it, becomes the less it serves its 
purpose. Depression, adversity, and loss, we have suf- 
fe-red in full measure during late years. Men have 
talked, with the wisdom of owls, of over-production, 
and have imputed the difBculty under which great masses 
suffered in recent years in procuring food, fuel, clothing, and 
shelter, to the alleged fact that we were over-producing corn 
and meat, that our mines delivered too much coal, that our 
looms wove too many yards of cloth, and that too many 
houses existed. Could anything be more absurd ? Surely 
nothing except the proposed remedy, namely, to issue yet 



BANKS AND BANKING. 1 9/ 

more of the very kind of base money that had been, all 
through this period, the most malignant cause of poverty, 
depression, and loss. 

Since the passage of the legal-tender acts in 1862 and 
1863, the so-called money of the United States in common 
use has been bad money. It is still bad, though in lesser 
degree ; and it will continue to be bad and to work subtle 
mischief, until coin only shall be lawful money and legal 
tender for debts incurred. 

In order to prove these dogmatic propositions, and to 
make the use of money and the function of banks and 
banking perfectly clear, we must analyze the simplest trans- 
actions, then proceed from the simple to the complex ; and 
last we shall see, if we succeed in the analysis, that the met- 
aphysical instruments of exchange, which are known as 
bank-notes, bank-deposit s, bank-credits, and bank-exchanges 
or clearances, are as essential to the quick and cheap distri- 
bution of corn, beef, pork, and cotton, as the railroad, the 
steamship, the butcher's wagon, or the baker's cart. It 
may, I trust,, become very plain to you that, unless these in- 
struments of exchange are convertible into the coin which 
they represent, their service is impaired or lost. 

If we analyze the simplest exchange, we find that all 
transactions are of the nature of barter. To go back to 
school-boy language, all trade, from the transaction in the 
proverbial jack-knife to Vanderbilt's great sale of twenty- 
five million dollars' worth of railway-stock, is nothing but 
" swapping." Why do we swap ? In order to get more 
than we give, /. e.^ something of more use to us than what 
we give ; here begin the metaphysics. The exchange oc- 
curs because there is a mental conception that the things 
bought will be of more service to the buyer than the thing 
3old ; hence the conception of value. Each person buys 



198 BANKS AND BANKING 

and sells. The man who sells corn buys money ; the man 
who buys cloth sells money. The equation may be formu- 
lated in words as " service for service," in which the concep- 
tion of price arises as the mean of the equation. The dollar 
is the common factor. 

When the mental conception of service is applied to sub- 
stance, then the equation takes the form of " product for 
product." Carry the mental conception a little further and 
we at once perceive that, in order that any exchange shall 
happen, another formula must be conceived, and that is 
" effort for effort." 

We may use these words rather than " labor for labor," be- 
cause the word " labor " has become limited to muscular or 
bodily work upon material substances, while effort includes 
that, and also, in addition, the mental functions or efforts that 
are serviceable to others, and for which something will be 
given in exchange. No one but a fool sells something for 
nothing. The mistake which the labor reformers make is in 
not admitting mental effort as one of the highest forms of 
service. 

The process which must occur in order that any exchange, 
barter, swap, or other dealing between men shall happen, 
must be a purely mental consideration of the effort exerted 
in the production of the thing parted with, and the effort 
saved by becoming possessed of the thing obtained. It 
may be unconscious cerebration ; but even in the proverbial 
knife-trade, each boy swaps his knife because he thinks he 
gets a better knife than he gives. In the boy's case 
there is usually a misconception on one side or the 
other ; but in the great commerce or swapping of the 
world, whether among men or between nations, each does 
obtain that which is more serviceable than that which is 
parted with, or else the traflBc ceases. 



BANKS AND BANKING. I.99 

In the last analysis all commerce is an exchange of re- 
productive forces. 

All consumption is a conversion of forces. In the end 
it is a chemical reaction ; and, the wider the distribu- 
tion, the more perfect the conversion. All this is element- 
ary, but yet necessary to the further treatment cf the 
subject. 

Exchange is necessary to the subsistence of the human 
race, and some kind of money is necessary to facilitate ex- 
change. 

The point most commonly overlooked in commerce is 
that two and two make five, — sometimes six, and even 
more, — and the units over are divided sometimes in equal 
portions, sometimes unequal, between the parties to the 
transaction. The force of the grain stacked upon the 
wheat-field, and of the cotton on the plantation, are both 
passive. Convert them in the factory, and an active force 
is developed which serves to clothe the bodies of men. 
Two measures of wheat and two measures of cotton make 
five meas^ures of cloth. The cotton on the field is useless 
to the producer ; the wheat may rot upon the prairie. 
Bring them together, add the work of the factory, and by 
their conversion the new force is developed that is meas- 
ured by a higher price in money than the prices of all the 
elements of which this new force consists. You will ob- 
serve that money does not constitute one of these forces, 
or one of the elements of the new force. It is only an in- 
strument used in their conversion. 

Let us now assume that the nation has had the intelli- 
gence to adopt the best kind of money yet discovered, 
namely, coined gold, as its standard of value and only 
legal tender, and coined gold and silver as its instruments 
of exchange or its money. 



20p BANKS AND BANKING. 

Into the somewhat abstruse question of the bi-metallic 
theory, and the ratio of gold and silver to each other, I 
do not propose to enter. Let us assume that the legal- 
tender acts whereby United States notes have been made 
lawful money and legal tender, have been repealed by Con- 
gress or annulled by the Supreme Court. We then stand 
ready to begin the consideration of the subject of banks 
and their relation to the railroad as the agents of ex- 
change. 

In order to be sure of our ground, we must begin ah 
initio. For this purpose, we will consider the traffic in 
black pepper. Pepper is produced in the island of Su- 
matra. Down to a comparatively recent period, the natives 
of the island had not developed wants in respect to the 
products of civilized countries to a sufficient extent to bal- 
ance the traffic in pepper without the inclusion of a consid- 
erable amount of money — I mean, of course, real money — 
in the transaction. And here you will observe that in all 
international trade there must be an exact balance. No 
nation can sell unless it buys, or buy unless it sells: and 
what is called the balance of trade is and must be only the 
balance of gold or silver coin that is bought or sold. 
These coins are commodities, products of labor, of pre- 
cisely the same kind as beef, pork, wheat, corn, and cot- 
ton, and subject to the same laws. In the year 1879 "^^ 
bought of foreign nations about eighty-four million dollars' 
worth of gold in the form of coins ; that is to say, we 
bought English, French, and American coins made of gold, 
weighing a certain number of ounces, of which weight the 
stamps on the coins were the certificates. A true state- 
ment of our foreign traffic, taking for the moment no con- 
sideration of credit or payment deferred on either side, 
would be that, 



BANKS AND BANKING. 201 

We sold so many bales of cotton, 

bushels of wheat, 

gallons of oil, 

pounds of meat. 

We bought so many yards of cloth, 

— tons of sugai", 

bales of hemp, 

ounces of gold. 

Assuming all transactions to be on a cash basis, there can 
be no balance of trade. The exchange is an exchange of 
equivalents, but each party assumes, and, on the whole, does 
make, a profit ; that is, each nation parts with that which it 
could not use with as much advantage to itself as that Avhich 
it receives. There is an exchange of forces, but in this ex- 
change two and two make five, and the one over is shared 
by the two parties. Sometimes one nation makes a larger 
profit than the other ; but both must gain something, or 
else the trade will stop. 

Let me call your attention to one point. After a nation 
has coin enough for bank-reserves and for use as pocket- 
money, the most unprofitable thing it can import is more 
coin. The only use you can make of the excess of coin is 
to send it out of the country again. You cannot consume 
it. All other goods and wares you can convert into some 
other useful form, but gold can only be made into jewelry, 
and silver into table-ware. 

When there is no balance of trade, so called, that is, when 
our cotton, grain, and oil are equivalent to dry goods, sugar, 
and spice, then the conditions are very sound and healthy. 
If, on the other hand, we sell what is worth a million to us, 
and in exchange appear to get what is entered at the cus- 
tom-house at a million and a quarter, then we may be bor- 
rowing the excess. Or if Ave export more in value than we 
import; we are either paying our debts or losing by the 



202 BANKS AND BANKING. 

traffic, and yet this last state of the account is commonly- 
called a trade that " shows a favorable balance." The coin 
we imported last year we needed, but this year we need 
iron, salt, sugar, etc., and the import of coin has diminished. 
The so-called favorable balance has diminished ; our de- 
mand for these things is giving our best customers for our 
grain and meat more ability to buy ; they can pay in iron 
when they could not pay in gold ; but I do not hear any 
complaint of adversity because the balance of trade has 
changed. We bought gold when we needed it, and paid 
with cotton, wheat, and oil ; now we want iron, wool, and 
tin, and we are buying them in the same way. 

Let us return to the pepper. The natives of Sumatra 
could not use all their pepper ; there was an over-production 
of pepper there ; they 'had very little use for American 
goods, but they could use good money. These people, 
however, wanted a particular kind of money. They had 
learned in some rude way that, whatever faults the Spanish 
nation had committed, their coined dollars, known as " Car- 
olus " or " Pillar" dollars , always contained the same 
amount of silver : therefore these dollars they would take ; 
they would swap pepper only for Pillar dollars. And hence 
it happened that the American merchant could only get 
pepper by sending his ship partly loaded with goods, and 
the rest in ballast, with Pillar dollars for the balance in or- 
der to buy pepper. How the pepper traffic is now carried 
on, I do not know ; this was the way when I was a boy. 
This is still the rule in respect to a large part of our traffic 
with China. For a very long period we settled our balance 
of trade, so called, with China in Mexican dollars. That is, 
we bought silver in Mexico, and sold it in China by the 
measure of the dollar. Here is another curious anomaly: 
Mexico stands as the example of all misgovernment, anar- 



BANKS AND BANKING. 203 

chy, and confusion, but Mexico never debased her coin. 
Is there not hope for her? We, however, at length ob- 
tained the confidence of a small portion of the Chinese, so 
that they were willing to take our trade dollars, and now we 
sell China a good deal of silver in that form. 

You will observe the most costly method of commerce in 
these two examples : special kinds of coined money to be 
gathered up, packed, and shipped across the seas, subject to 
all dangers of loss by Malay pirates but a little while ago, 
and to all the constant dangers of storm and shipwreck for 
all time ; the ship perhaps making a voyage half around the 
world almost empty in order to bring home the pepper or 
the tea. You can readily see how limited such commerce 
must be. 

Transfer these conditions to our own land ; suppose that 
the Louisiana purchase had never, been made, and that 
Iowa, Nebraska, Kansas, and all that vast Mississippi valley 
belonged to a foreign nation, and were separated from New 
England by a line of custom-houses more costly and diffi- 
cult to pass than the Hoosac Mountain or the ridges of the 
Alleghanies ; assume that there was no mutual confidence, 
and that each nation watched the other with jealousy and 
suspicion from behind ramparts guarded by five hundred 
thousand armed men, with a yet greater number in reserve, 
wasting even in the reserve as much time in drill with rifle 
and sabre as they would spend in work at the plough, the 
loom, and the anvil. When you have assumed these con- 
ditions, you have only made a comparison with what are 
called the civilized nations of Europe, omitting Russia and 
Turkey ; who, with only four times our population, now 
stand thus facing each other with two million men in camp 
and barracks, a larger number in reserve, bound in the fet- 
ters of sixteen billion dollars of national debts secured by 



204 BANKS AND BANKING 

mortgage upon a territory only one-half as large as ours, 
omitting Alaska. Study the history of these countries, and 
you will find that, in former timfes, commerce could only be 
carried on between them by the actual movement of the 
coin ; and that most of their wars have been incurred, and 
their great debts imposed, because the beneficent function 
of commerce was denied, and because each tried to gain a 
special advantage over the other without rendering a service 
in return. 

But you will say: These obstacles to mutual service do 
not exist on this territory ; what have they to do with bank- 
ing ? I only refer to them to make the contrast greater. 
Even these contests of race and differences of institutions 
and language would not restrict the exchange of corn for 
cotton, of beef for iron, of wheat for fabrics of every kind ; 
would not be as great obstacles to commerce as those that 
are removed by the existence and use of banks, and by the 
service of bills of exchange, bank-notes and checks, and 
bank clearing-houses. 

Suppose you could not get a barrel of flour from the 
West without sending out a five or ten-dollar gold coin to 
pay for it, and then you begin to see the function and use 
of banks and bankers. 

By the use of a little slip of paper inscribed with a few 
words, signed by a responsible bank-officer, the title to one 
barrel of flour passes from the farmer in Nebraska to the 
mechanic in Massachusetts ; while the title passes from the 
mechanic in Massachusetts to the farmer in Nebraska, to a 
certain number of grains of gold minted into coined money 
in the works of the government at Philadelphia. 

The coin may be all the time kept for safety in the vault 
of the Sub-Treasury in New York, and the barrel of flour 
may be stored in a warehouse in Chicago for months before 



^ANkS AND BANKING. 2o5 

it is consumed ; but the title is passed from one to the 
other by the assignment of the little strip of paper, in- 
scribed, " The Merchants' National Bank promises to pay- 
to the bearer five dollars on demand," signed by the presi- 
dent and cashier ; or by another strip of paper in similar 
form : — 

Merchants' National Bank. 

Pay to the Iowa farmer five dollars on demand. 

To THE Cashier. (Signed) JOHN SMITH. 

This is an epitome of all transactions. The bank is the 
agent for assigning and transferring titles to property : that 
is the exact function of the bank or banker, nothing more 
and nothing less. The property assigned may either be its 
own capital in coin, or a title to some property of its de- 
positors. A part of its capital is kept in reserve in the form 
of coin, in order that if any one wants actual money, — true 
money, coined money, — it may always have enough to meet 
that demand. It lends the rest of its own capital, and it 
acts as agent to transfer titles to the capital of others. 

If these functions are carefully considered, it will be ob- 
served that the abundance of notes, checks, bank-deposits, 
bills of exchange, and other instruments of credit by which 
titles to actual property are passed from one to another, 
will be in exact ratio to the quantity of capital, that is, of 
commodities or property, thus being moved or assigned at 
any given time. This property, these commodities, consti- 
tute what is called the quick or active capital of the com- 
munity, consisting of beef, pork, hay, corn, cotton, dry 
goods, tin-ware, boots. Bear in mind, we are not now con- 
sidering savings institutions, also called banks, that deal 
more ia titles to fixed capital, buildings, works, and im- 
proved lands, but we are considering the functions of com- 



2o6 BANKS AND BANKING, 

mercial banks and bankers who serve the purposes of mer- 
chants and manufacturers. 

The interest which is paid, and which constitutes the 
profit of the bank or banker, is paid in a Hmited degree 
only for the use of money : no actual money has passed ; 
the money is substantially all in the bank-vault, or in the 
vault of the Sub-Treasury ; the interest is paid for the use 
of the property, of which the bank-note or credit has passed 
the title from the lender to the borrower by the measure of 
money. This property is a product of labor ; interest is 
therefore paid for the service of labor already done in the 
past, in order to enable the borrower to perform more work 
in the present. 

When you mortgage a house to a savings bank, what do 
you borrow? is it not a part of your house? You are a 
mechanic, and have saved five hundred days' work for which 
you have a thousand dollars in gold coin ; you spend that, 
but you want more house ; you borrow a title to another 
thousand dollars, and buy with it five hundred days' work 
of other mechanics, to finish your house ; and you owe the 
sum that you have spent until you can work it out your- 
self, but you have really borrowed half your house. 

Prosperity consists in the rapid consumption of the goods 
and wares that I have named, meat, flour, pork, iron, cotton, 
and the like. 

When the money in use is good money, such as gold coin, 
that only changes its value in relation to other products of 
labor in long generations, then confidence will be sufficient 
to promote the quick circulation of commodities, and then 
will follow the consequence so often mistaken for the cause, 
— there will be a great abundance of bank-bills, bank-de- 
posits, and bank-credits ; every one will say, " Money is 
very plenty ; " but the real fact may be that the amount of 



BANKS AND BANKINd 20/ 

real money held in reserve to meet emergencies, in the 
vaults of the banks, and the Sub-Treasury, may not have 
changed a single dollar ; but, the money being good, pro- 
ductive and constructive enterprise will be active because 
confidence is assured. 

In such periods it is capital that is plenty, — iron, beef, 
cotton, potatoes, pepper and salt, milk, butter and cheese 
(the annual value of our dairy product is greater than that 
of our cotton), and we work cotton into cloth in order to 
obtain butter, cheese, eggs. De minimis curat econoiniciis. 
When capital is abundant and confidence is great, the new 
railroad is projected, the new mill is constructed, the new 
house is planned, and we spend or consume»the products of 
the year present, in order to be able to provide for the 
wants of the years to come. We convert the perishable 
forces of the year present, that would otherwise decay, into 
the more permanent forces, — into railroads, mills, and works 
that will assure more abundant production in future years. 

When your money is not true, that is, when it is subject 
to the caprice of Congress, people live from hand to mouth, 
and the work that is necessary to be done by each genera- 
tion to prepare for the increase of the next is stopped, be- 
cause the money that may be received in the future may 
not measure the effort of the present. For several years 
after the panic of 1873 we lived as if never another mile of 
railroad, or another factory, or another house, would be 
wanted ; the portion of the population usually employed in 
providing for future need was reduced to idleness, — may be 
five in a hundred ; wages were depressed, the stock of goods 
piled up, and wiseacres talked of over-production ; then in 
the next breath they would say we must save, and not 
spend. Why ! the very thing needed was that we should 
spend our excess of iron and copper, of corn and pork ; 



2o8 baMks And bankinc. 

spend them in new work. That is just what we are doing 
now. Money was said to be plenty in State Street, and 
would not bring three per cent, per annum. But what was 
this money? It was the title to these unspent commodities 
that no one had confidence enough in the future to use or 
spend, because the measure of spending, the money, was 
bad. 

On the 1st of January, 1879, ^^^^ came to believe that the 
standard of value had become fixed, that specie payment 
was resumed, that gold coin had become once more the 
money of the nation. Confidence returned, and now what 
do we see ? We are spending again in useful work ; we are 
converting iron' into railroads and machinery; brick and 
timber into mills and works. At the same time our stock 
of real money, held in reserve in gold coin, has increased 
more than one hundred million dollars. 

As soon as we began to use good money, it flowed in 
upon us. We have ceased to hear of over-prod,uction, yet 
the products of 1879 were the most abundant ever known. 

It is our mental condition only that has changed. Now 
that good money is even partially assured, we find our force 
is doubled ; industry is resumed, and labor is well employed, 
because confidence is restored. 

In order that we may more readily comprehend how 
these little strips of paper that I have described — these 
checks and bank-notes — really do their work, let me use a 
word very familiar to those who, like myself, have been 
book-keepers, the word " cash." If you ask me now, " Have 
you any money in your pocket ? " and I followed my own 
rule, I should confine my answer to the coin in my vest- 
pocket ; but if you asked me if I had any " cash," I should 
also include the bank-notes in my pocket-book. 

In book-keeper's parlance, " cash " consists of checks, 



BANKS AND BANKING. 209 

bank-notes, United States notes, and coin. A book-keeper 
never says his money is short, when he cannot square his 
account ; it is always, " My cash is short." 

I suppose none of you know what it is to be short of 
cash ; if you do, you are probably not very particular what 
word designates the instrument by which the deficiency is 
covered. 

The cashier used to be the guardian or keeper of the 
" caisse," or chest ; he was the chest-keeper, in which coined 
money was kept by each merchant when banks were few or 
none. Now his chest has disappeared, and he keeps a cash- 
book, in which titles to money are registered ; and, in place 
of coin, he balances his account by means of the notes and 
checks by which the titles to money or to other property 
measured in money are passed from man to man. 

How do we use this " cash " as a substitute for money ? 

The other day I wanted some smoked venison-hams, such 
as are brought into St. Paul, Minnesota, from Pembina, 
where deer and Indians abound. I knew no one in St. Paul 
who would sell me hams unless he had " cash " in hand. 
What did I send him? Not a piece of gold ; that would 
have been foolish, although I had three ten-dollar pieces of 
gold in my pocket, that I had drawn from a banker, in re- 
compense for a lecture given to this club last winter and 
afterward published in an English review ; that is to say, X 
had some true money — some capital in gold coin. 

I took that money to a bank, and obtained a cashier's 
check on a bank in New York. I parted with my three 
coins, and obtained a title to, or draft for, other three coins 
of same denomination ; that is, containing the same exact 
weight of gold. I sent that title to the provision-dealer in 
St. Paul, and by the next train of cars came back the 
smoked vension-hams, cured by the Indians of Pembina. 



210 BANKS AND BANKING. 

Money might have been said to be plenty in St. Paul, to 
the exact amount of the thiee ten-dollar gold coins; but 
the coins themselves were in the vault of the bank in 
Boston, to whose cashier I paid them for the draft. The 
Indian had brought in the hams to the shopkeeper in St. 
Paul, and had exchanged them for blankets, gunpowder, 
bullets, and probably some whiskey, for which the shop- 
keeper owed the manufacturers of whom he had bought his 
stock. In this transaction you have an epitome of all com- 
merce : the shopkeeper in St. Paul received the title from 
me to three gold coins, — not the money itself, — and sent 
me hams ; he swaps ham for a title to gold ; he deposits 
that title to gold in his own bank in St. Paul, with other 
" cash " received for goods ; then he draws his own check 
on that bank, and pays his own debt for blankets and gun- 
powder : and so the title passes from hand to hand, and 
from bank to bank, until, in the clearing-house of New 
York, one check is balanced against another, and a little 
specie or real money passes from one to another to settle 
the balance. 

My small mental effort procured the gold for me, and the 
Indian's gun procured the ham for him. In the consumption 
of the ham the substance of my brain was restored, after 
the effort which found its expression in the English review, 
so as to enable me to make this effort to explain the science 
of banking to you ; while, in the consumption of the whis- 
key, the Indian obtained a gratification, and, in the use of 
the blanket and gunpowder, he was fitted out for another 
hunting expedition. 

The circulation of the commodities called the bank-check 
into existence. " Cash " was plenty in St. Paul to the ex- 
tent of that check ; it served its purpose in liquidating other 
transactions ; but the only " money " transactions in the 



BANKS AND BANKING. 211 

whole sequence was the movement of three gold coins from 
the vault of Kidder, Peabody & Co., in State Street, to the 
vault of the Eliot National Bank, in Devonshire Street. 

How did the coin get into the vault of Kidder, Peabody 
& Co. ? Perhaps as a part of the $84,000,000 sent here 
from England in 1879, '^'^ exchange for Minnesota flour, 
ground in the mills of the same city of St. Paul ; or per- 
haps it had come as a product of the labor of the 
miner in California, which he had parted with, in order that 
he might purchase the cowhide boots of East Brookfield, or 
the heavy woollen blankets made in some Massachusetts 
factory. 

The elements of banking might be put in a formula, al- 
most in a scale. They consist of : — 

A little gold coin or true money. 

An unmeasured amount of character, prudence, fore- 
thought, and integrity, in the banker. 

An unlimited amount of confidence on the part of the 
community. 

The scale cannot be given in adequate terms. For this 
country, it might now be stated something like this : — 

Three hundred million dollars of gold coin suffices as the 
standard by which to measure three hundred thousand mil- 
lion dollars' worth of purchases and sales every year. 

By the use of notes issued by, or checks upon, banks and 
bankers, more than 100,000,000 tons of food are moved in 
each year from the producer to the consumer, and thus the 
subsistence of 50,000,000 people is assured. 

This is the power of true money ; this is the money- 
power. This is the work that knaves and sentimentalists 
denounce, obstruct, and retard. This is the measure of the 
integrity of men ; the measure of the trust that each man 
reposes in his neighbor ; the standing testimony that total 



212 BANKS ANJb BANKING. 

depravity is but the gloomy dogma of the shallow thinker, 
whose insight into the great work of the world is but the 
depth of his own little mind. 

The great crops of this country — grain and hay only — 
weigh 100,000,000 tons; they constitute food for man and 
beast, — two tons to be moved from field and pasture to 
subsist each man, woman, and child ; moved not once, but 
twice and thrice. The grain must be moved from field to 
railway, from railway to mill, from mill to warehouse, from 
warehouse to baker's oven. The hay and roots must be 
moved from field to stable, be turned into butter, cheese, 
and meat, be exchanged for sugar, tea, coffee, and spices ; 
each kind must be distributed, worked over, converted from 
one form into another, and at last consumed. The mind 
cannot conceive the exchanges that take place each and 
every day. 

The money lies safe in the vaults of the great cities, but 
the little slips of paper, by which a title to it is passed from 
hand to hand, serve all the purpose, provided only that the 
money is good, and that bank ofificers are honest and pru- 
dent men. There is no better measure of the character oi 
a nation than the use it makes of banks. 

We can only approximate the work that must be done in 
order that each of you may subsist a single year. Two tons 
of grain and hay to each one, partly used directly and 
partly converted into meat: each of you eats more meat 
than flour ; then come the milk, the sugar, the vegetables, 
the coal to cook the food and warm the house. All this 
conversion of force must take place that you may not 
starve, — not less than three tons weight, six thousand 
pounds, moved at least three times ; first, thousands of 
miles, then hundreds, and at last, half a mile as to each 
small parcel. This work must be done every year for every 



BANKS A ND BA NKING. 2 1 3 

one of you, — too much work done for the value of a fresh- 
man, some of you sophomores may think. 

All this dead weight must be moved and recombined, 
that each of you may subsist ; and if the work stopped a 
single year, or even half a year, the world would be depop- 
ulated. A snow-storm in London reduces hundreds to the 
verge of starvation. And through all these changes the 
little strip of redeemable stamped paper, with a promise to 
pay upon it, and signed by one or two names, — the book- 
keeper's " cash", — has been a sufficient instrument to serve 
all this vast and complicated traffic ; the bank-note, the bill 
of exchange, the bank-deposit certified by a few figures in 
a book, with a little coin to make change and settle bal- 
ances, has measured each change of ownership, and has 
passed the title of all this property from man to man ; 
while the railway, the steamship, the butcher's cart, and the 
grocer's wagon, have moved the property itself. There is 
not coin enough in the world to do this work alone ; but 
without the coin to serve as the standard by which to 
measure and guage all this traffic, it would mainly cease. 
The whole mass of gold in the world, the painful accumu- 
lation of centuries, valued and sought by every race and 
every nation since the dawn of history, would not fill this 
hall. The one product of labor that neither moth nor 
rust can corrupt, that neither air nor water will oxidize, — 
who can tell when its service first began, or how it came to 
be used as money or the standard of value? 

Can you find a deeper problem in metaphysics than the 
analysis of the conception of value, — the estimation of 
gold, — the twofold process of the mind which seems so 
simple when we buy and sell, but is so subtle ? If you can 
follow the course of the little slip of paper stamped with a 
promise to pay dollars, as it passes from hand to hand; and 



214 BANKS AND BANKING. 

carries with it the title to the hundred million tons of food, 
until each daily ration reaches the mouth that is to con- 
sume it ; if you perceive that as each ton moves by rail and 
river, the paper slip, the book-keeper's " cash", passes by 
mail and hand ; if you can see that the volume of little 
slips and the sum of the figures on the ledgers of the mer- 
chants and the banks, mark as many dollars of promises and 
credits as there are dollars' worth of merchandise moving 
from producer to consumer, — then you will have mastered 
the first lesson in banking ; and I may tell you perhaps, 
privately, that you will know more about it than ninety- 
nine bank-directors in every hundred. 

If you will try the experiment, you will find that nearly 
every practical man will tell you that banks borrow and 
lend money, and will be amazed at your audacity if you 
deny it ; but at the same time they will admit that neither 
a bank-note nor a bank-check nor a bank-deposit is money. 

Does not this speak well for the general integrity of 
men, that more than ninety-five per cent of all the transact 
tions of life — the exchange of the hundred million tons of 
food that I have named ; the conversion of this force into 
the thousand forms that make up the necessities, the com- 
forts, and the luxuries of life ; the whole traffic on which 
the subsistence of nations depends — are worked by meang 
of little slips of paper that merely carry directions from 
one book-keeper to another how to make up the merchants' 
and the bankers' accounts, so as to show by the trial bal- 
ances who is in possession of the property exchanged, or 
who is consuming it at any given time ? You will observe 
that these transactions are world-wide. The bill of ex- 
change that passes from nation to nation is but another 
slip of paper by means of which a title is passed. Even 
yet more wonderful is the telegraph. It almost passes 



BANKS AND BANKING, 2 1 5 

comprehension when we witness its work. The tea mer- 
chant in London sends one message to China ordering tea, 
and another to San Francisco for silver, and before the 
week is ended both substances are on their way from the 
producer to the consumer. Two clerks make their en- 
tries, two letters of advice are written, and in the London 
banker's ofifice the transaction is settled. 

It is important to impress upon your minds that banks 
and bankers transfer titles to consumable commodities 
from producer to consumer ; and, further, that in the con- 
sumption of the commodity by the consumer is developed 
the force to produce some other thing with which the first 
producer is paid. The title passes by a written or printed 
slip that is but the certificate of " cash " in the book-keep- 
er's accounts. Nearly all the so-called money that passes 
is a direction from one clerk to another how to make an 
entry on his ledger. I have repeated this formula many 
times, and have tried to make it plain ; it is the essential 
idea that must be comprehended. 

It follows of necessity, if the system of banking is sound 
and bankers are prudent, the sum of the bank-notes, bank- 
deposits, and other forms by which titles are transferred to 
property on its way to consumers, can never exceed the 
nominal value of the commodities : hence money is said to 
be plenty or otherwise, when the quantity of commodities 
is abundant or otherwise. The danger to banks and bank- 
ers comes when prices have been carried to a very high 
point, and begin to decline slowly or quickly : then comes 
the doubt whether the men who have borrowed titles to 
cotton or wool or other merchandise, through the inter- 
vention of the banks, can convert these materials into 
cloth or the like, and obtain by its sale a title to as much 
as they have expended. 



2l6 BANKS AND BANKING, 

: The doubt begins with cautious men, spreads slowly or 
quickly ; if the activity has been very great, if the sub- 
stance borrowed has been wasted in useless mines, or spent 
in constructing railways that are not yet wanted, then panic 
may ensue ; each depositor fears his title will be passed to 
some one who will not use it wisely ; then a run is made 
upon the bank to convert the deposits into money, and 
withdraw gold from the bank. These crises come usually 
for good reason ; they are the process of cure, not the dis- 
ease itself: the disease has been the wasteful or injudicious 
expenditure of the substance long before borrowed ; it has 
been the imprudent lending of titles to commodities to 
those who in consuming the commodities have not repro- 
duced something that is salable ; who have spent them 
without results. 

-. Let us now consider the work of a national bank. 
■ The process of organizing and working a bank is very 
easily comprehended when the fundamental idea is grasped, 
that a bank lends its own capital, and transfers titles to the 
capital or property of its depositors. 

A portion of its capital it must always keep in its vaults 
in coin, as a reserve. How much that reserve should be, 
depends upon the kind of business done by the bank; and 
the proportion of reserve is an indication of the prudence 
and skill of the manager. 

Let us assume that the capital of a bank has been paid in by its 

stockholders in gold coin, say ...... $1,000,000 

The bank proposes to become a national bank, and it at once lends 
one-half of its coin to the government at four per cent, interest, 
for which it receives bonds 500,000 

It has left in coin 500,000 

On the deposit of the bonds as collateral security for the notes it 
may issue, the government then authorizes it to issue national- 
bank notes for the sum of 450,000 



BANKS AND BANKING. 21"/ 

What is a national-bank note? It is a promise of the 
bank to pay to the holder a certain number of coined dollars 
on demand. The notes of the bank, when in its own posses- 
sion, are therefore unused evidence of its own debt, and are 
of no effect until issued. How do they get into circula- 
tion ? 

A manufacturer who has made ten thousand dollars' worth 
of cloth, and who has not paid for the wool or the labor, de- 
sires these notes to use for the purpose of such payments. 
You will observe that they are promises to pay coin, and 
the bank has in reserve half a million of coin. These notes 
are therefore transferable titles to a part of that coin. 

The manufacturer has sold the ten thousand dollars 
worth of cloth, for which he has not yet paid, to a job- 
ber, for eleven thousand dollars, and has taken his note at 
four months for it. The jobber has the cloth ready to sell 
to the consumers : the consumers are in part wool-growers 
and mill-operatives. The note is a title to the equivalent 
of the cloth in coin ; the sale of the cloth will enable the 
jobber to pay the note. Therefore the note of the jobber 
is a title or evidence of the existence of so much cloth on 
its way from the producer to the consumer. 

The manufacturer takes the note, due in four months, 
to the bank, to be discounted ; the president deducts in- 
terest at whatever the market rate may be, say at six per 
cent, or two per cent, for four months, and gives the cus- 
tomer $10,780, in its own bills or promises to pay on de- 
mand. In that discount of interest is the profit to the 
bank ; the manufacturer pays for the wool and the labor 
$10,000, and has $780 left in bills. He now wants some 
foreign wool, for which he must pay gold. He presents 
$780, bank-bills, and draws that amount from the bank's 
reserve of coin ; the rest of the notes circulate from hand 



2l8 BANKS AND BANKING, 

to hand ; some of the farmers and operatives who received 
them from the manufacturer buy goods of the same dealer 
who purchased the cloth ; by the time his note is due he 
has received these bills, and has deposited them in the 
same bank that owns his note, and, when the note is due, 
draws his check, and thus pays, or offsets his deposit-ac- 
count against his note. 

While the note has been in existence, the cloth has been 
in use ; it has enabled those who wore it to do more work, 
to reproduce other capital to take its place. 

All through the transaction the gold has been in the 
bank, ready to redeem the bank-note ; the cloth has been 
reproducing capital, to assure the payment of the mer- 
chant's note. The bank-note and the merchant's note have 
divided the title to the gold and the cloth, and passed it to 
a hundred different hands ; but the issue and redemption 
have been worked to the convenience and profit of each 
and all. 

Confidence and credit and a few slips of paper have re- 
moved the need of weighing out gold for wool, and wool 
for cloth, and cloth for labor. The title has been passed, 
and all the work has been done, because men can trust each 
other; the slips of paper have carried the title, and en- 
abled the book-keepers of the banks and merchants to keep 
their record of credits granted and obtained ; and, in the 
clearing-house, one slip written off against another squares 
the account. Coined money has been the standard ; con- 
vertible paper money has been the instrument ; an entry in 
a ledger has been the conclusion. 

In order that the conclusion may be just and true, the 
substance to which the title has been passed must have been 
rightly spent ; more force must have been generated than has 
been consumed. The difference will have taken the con- 



BANKS AND BANKING. 219 

Crete form of a new and useful railway or mill, a better 
house, a college gymnasium, or a Boylston Hall, in which 
students may be making preparation for more effective work 
in the future. Thus the world goes on, never more than 
one year removed from starvation, yet with always enough 
and to spare. Whether that which would suffice shall be 
where it is wanted, or not, is no longer a question of phys- 
ical means : railroads and steamships can assure distribution 
to almost every part of the world. The conditions of pros- 
perity are now peace, order, and good-will among nations, 
good money, honest and prudent bankers. When the in- 
terdependence of nations is admitted, then, and only then, 
will commerce forbid war. 

I have stated to you that our great crops of grain and 
hay weigh more than one hundred million tons. The hay 
is only a partial measure of the meat, the butter, and the 
cheese ; the roots add yet more. One hundred and fifty 
million tons of food is within the measure of what we con- 
sume ourselves, or send abroad to exchange for goods and 
wares of every sort, — three tons to each man, woman, and 
child, to be converted into power. Food is fuel for the hu- 
man engine. " Going into business," which some of you 
may contemplate, means a share in the conversion or dis- 
tribution of this force of three hundred thousand million 
food-pounds. 

What was your share to-day ? About sixteen and a-half 
pounds ; three consumed directly, the rest indirectly. Wit- 
ness the power of money : that it must be an accurate 
measure of the division of three hundred thousand million 
food-pounds into daily rations of three pounds each. Leg- 
islators in Washington are now tampering with the stand- 
ard of value, and attempting again to alter the measure by 
which all this vast traffic is to be conducted. 



220 BANKS AND BANKING. 

You may see how little we are governed, — how much we 
may be misgoverned, — when you attempt to conceive of 
the mischief that would be done if all the rules by which 
this work is accomplished needed to be established by 
statute. Do you not see that when any attempt is made to 
extend the function of statutes beyond the enforcement of 
justice and the collection of the necessary revenues, with 
right provision for education, it must almost of necessity 
raise barriers between men and nations that would have no 
existence in the nature of things? Honest men need no 
statutes for the conduct of their business: the statute in- 
tervenes only when some one tries to get an advantage 
over another ; in other words, tries to obtain more service 
than he renders. 

One by one all sumptuary laws have been repealed, or 
have fallen into disuse, because trade makes its own laws. 
If a tariff for taxation is assessed at rates beyond a certain 
point, the smuggler renders it inoperative. Attempt to col- 
lect two dollars a gallon on whiskey again, and the revenue 
on it would almost cease. 

Issue fiat money, and who would exert himself to become 
possessed of it ? Only the man who believed he could 
cheat his neighbor by inducing him to give something for 
it, or who would force him to take it, under the operation 
of a legal-tender act, in place of the true dollars that he had 
promised. Show me an advocate of " fiat money," and, in 
nine cases out of ten, I will show you a man who either de- 
sires to cheat his creditors, to grow rich by causing other 
men to become poor, or to live without work on the prod- 
uct of some other man's labor. 

I shall now be obliged to lay aside my strict definition of 
" money," and the limitation of that word to coin, and fall 
into the customary way of treating convertible bank-notes 



BANKS AND BANKING, 221 

and legal-tender notes as money, or, in common speech, as 
"paper money; " better designations are, in respect to coin, 
*' real money," and in respect to convertible paper, " repre- 
sentative money." 

Notes serve the purpose often given as descriptive of 
money ; they are instruments of exchange ; and it would 
be almost a Quixotic attempt to strive now to change their 
common designation. We will call both classes of notes, 
" money," in order that 1 may more fully explain why one is 
good paper money and the other bad paper money. Both 
are promises of coined dollars on demand, but the redeem- 
able bank-note is the symbol or measure of the cloth, meat, 
corn, cotton, or some other substance, on its way from pro- 
ducer to consumer. It can only get into circulation, as I 
have attempted to explain, as a representative title, or evi- 
dence of substance, in the consumption of which will be 
given the power to redeem the note. 

The legal-tender United States note, on the other hand, 
is the symbol or evidence that the government forced its 
citizens to lend it food and munitions of war fifteen to twenty 
years since, all of which were consumed without reproduc- 
tion ; it is evidence of capital destroyed, and of debt due 
and unpaid. Its convertibility into coin depends on the 
power of taxation. It has not the first attribute of goo(^ 
paper money, except so far as coin is held in reserve for its 
payment; nor has the government any immediate means of 
payment, if any sudden distrust should cause the notes to 
be presented beyond the sum of its reserve in coin. In 
banking, the proportion of reserve can be determined by 
the nature of the business done, the condition of the crops, 
the state of the foreign exchange, and many other indica- 
tions, a knowledge of which constitutes the skill of the 
banker ; but the safe measure of reserve for a government 



222 BANKS AND BANKING. 

note can never be less than dollar for dollar in coin, and, 
when that standard is established, the issue of the notes 
yields no profit or saving of interest. 

In conclusion, let me indicate one other advantage which 
a national-bank note possesses over the notes of the State 
banks, formerly used. The State-bank notes depended en- 
tirely on the skill and judgment of the bank managers : 
when a bank failed, the holders of the bank-notes had a 
lesson in the meaning of words; they found out to their 
cost that notes might cease to be money, either in fact or in 
semblance. 

State banks often failed to pay their notes as well as 
their deposits. 

The national-bank note, or promise of the bank, cannot 
be issued unless the bank has first lent a part of its capital 
to the government, for which the government pays inter- 
est, and in evidence of which it has issued bonds. These 
bonds are deposited as security for the payment of the 
notes. The bank may fail, it may defraud all its depositors 
of every dollar of the title to capital which they have de- 
posited with it, but it cannot defraud the holder of a note ; 
if the bank does not redeem the note at its own counter, 
the holder can present it to the controller of the banks, cause 
the bonds deposited as security to be sold for coin, and draw 
the coin. The bank-note is secured first by all the other capi- 
tal and profits of the bank not lent to the government, by all 
the commodities in title to which it was first issued by the 
bank and obtained circulation in the community, and, sec- 
ond, by the collateral security of United States bonds bear- 
ing interest. 

The United States note depends upon the power of fu- 
ture taxation, and is at the caprice of Congress, into which 
such men as B. F. Butler have more than once found an 



BANKS AND BANKING, 223 

entrance by the votes of their dupes and their confederates 
in Massachusetts and elsewhere. It does not represent 
property in existence, but substance that has been de- 
stroyed. 

Which of these notes best meets the conditions of 
safety ? 

May it not be afifirmed that the national-bank note leaves 
nothing to be desired, if paper money convertible into coin 
is to be used at all ? It is secured beyond a reasonable 
doubt, and as it has the semblance of true money to masses 
of people who cannot appreciate the distinction between 
real money and its promise, it is eminently right that the 
government should protect the holders of the notes, and 
assure their absolute convertibility on demand by requiring 
the deposit of the United States bonds as collateral security 
for the notes. 

We have, indeed, brought United States notes to par in 
gold coin, and for the moment he who presents them for 
payment will receive the coin ; but if the preceding state- 
ment of the function of banks and of bank-notes has any 
foundation in principle, the attempt of a government to as- 
sume the functions of a bank of issue is an economic ab- 
surdity fraught with the gravest dangers. 

The question is not yet determined, but is still at issue, 
whether the money of the nation shall be good or bad for 
the next few years. 

The lawful money is now good money in gold coin, and 
^«<3? money, or United States notes first issued for the pur- 
pose of collecting a forced loan, and made a legal tender 
for that purpose only. 

During the war these notes depreciated to less than forty 
per cent, of their nominal value ; they are now at par, and 
are nominally redeemed in coin ; but although the lawful- 



224 BANKS AND BANKING. 

ness of their reissue is contested by the ablest lawyers and 
the members of the Senate and House of Representatives 
most competent to decide the question, they are being re- 
issued even while the validity of the acts under which the 
reissue takes effect is before the Supreme Court for adjudi- 
cation, it being a question not yet decided. Their reissue 
is not confined to the purposes for which the executive 
might feel obliged to use them under existing laws, but 
they are being forced into use again in the purchase of 
bonds not yet due, for the sinking fund, without reason or 
necessity. 

This course is but a repetition of the disastrous policy 
followed under the administration of the Treasury Depart- 
ment by most of the predecessors of the present secretary 
ever since the ofifice was held by Hugh McCulloch. When 
these notes which have been paid in coin are reissued in 
exchange for bonds, such notes being legal tender until 
otherwise decided by the Supreme Court, and therefore 
competent under existing laws to constitute a portion of 
the bank reserves in place of coin, — they, in fact, constitute 
an element of the currency not called into use by the opera- 
tion of the laws of trade. 

They are therefore forced into use where they are not re- 
quired, and may at any time work the same effect that they 
did before, to wit : inflate prices, and presently cause the 
export of the gold coin which will be displaced by them. 
Next may follow their depreciation, and possibly another 
suspension of coin redemption by the treasury of the United 
States; or what would be a yet greater misfortune, 're- 
demption in depreciated silver coin. 

The first steps in this vicious sequence are now apparent, 
and the malignant effects of the attempt of the Tr'easuiy 
Department to do the work of a bank of issue, for which it 



BANKS AND BANKING. 22$ 

is radically unfit, are now to be as plainly seen- as they have 
been many times before. 

Speculation waits upon the decision of the Secretary of 
the Treasury as to how much bad money he will inject into 
the currency in each week ; and the eaves-droppers of the 
lobby listen for the corrupt whispers that shall enable them 
or their confederates to plunder the victims of a false 
monetary system 

The prices of the necessaries of life have been subject to 
great fluctuations, as they have before when the currency 
was tampered with. In 1879, they rose faster than the 
wages of those who did the work of producing them, and 
strikes prevailed everywhere ; the unwary were again misled 
by the specious representations of those who live upon the 
credulity of their dupes, and the thousand evils of tamper- 
ing with the money of the country became patent to those 
who look beneath the surface. Mining stocks were sold at 
such prices that if the product of the mines would pay a 
dividend on the nominal sums given, silver would be depre- 
ciated at least one-half from its present ratio to gold ; any 
thing that was called a railroad served the purpose of the 
stock-jobber, and many of the other symptoms became 
visible which constitute the disease of which a commercial 
crisis is the usual process of cure. 

These are the symptoms of a false element in the finances 
of the country ; of bad money again displacing that which 
is good. 

Whether an inflation caused by the use of government 
legal-tender notes nominally redeemable in specie, and not 
cancelled when thus redeemed or paid, but reissued, will 
work as great a disaster as the inflation caused by the forced 
circulation of the same notes when irredeemable, is one of 
the problems not yet determined.. 



226 BANKS AND BANKING. 

The enormous crops of the past few years, and the possi- 
bility of moving them which the railroad and the steamship 
have given us, have enabled the Treasury Department to 
meet the conditions of the resumption act, and to stand ready 
thus far to redeem the notes in gold coin when presented. 
A true statesman would be able even now, to assure the 
stability of coin payments for all time to come ; but, to the 
shame of our intelligence as a people, it is yet a question 
whether another financial disaster may not be needed, be- 
fore the simple principle of finance is learned, to pay your 
debt due on demand first and finally, rather than to reissue 
your own evidences of debt due on demand, and force them 
into circulation as lawful money in the purchase of long 
bonds not matured. 

If we are saved from another disaster which may come 
because of the want of capacity on the part of those who 
assume to govern and control the finances of the country to 
comprehend, or their unwillingness to accept, the simple 
principles that underlie the question, it will be from the 
same causes that have brought us into our present favor- 
able condition in spite of previous mismanagement. 

The enormous productive capacity of the country and the 
energies of the people, aided by the railway system, have 
enabled us to surmount financial incapacity, under previous 
administrations, equalled only by that charged on the 
Tory administration of Great Britain by the great leaders 
of the Liberal party. 

Full credit may be given to the present Secretary of the 
Treasury for executive ability and administrative power. 
The conduct of affairs has been admirable during the period 
when the circumstances of the time — our great harvest, and 
the bad crops in Europe — gave us, for the time, the control 
of the gold of the world. 



BANKS AND BANKING, 22/ 

But the point of danger is near or is already reached ; the 
test of statesmanship is now being applied. Circumstances 
may again save us, but the reissue of notes already paid, 
after the disastrous experience of years past, caused by the 
same vicious policy, may fully warrant those who resisted 
that policy then, and foretold its malignant result, in again 
sounding a note of warning. 

The danger of a debt currency must exist so long as the 
promise of coin is forced into use by an act of legal tender. 
Such a currency may for a time be redeemable, but it con- 
stantly tends to become irredeemable. 

We have been saved from inflation and an increased issue 
of irredeemable paper money only by the veto of a Presi- 
dent, the policy of whose financial secretary had led logi- 
cally and directly to the vicious legislation which was 
stopped by his veto. 

Great Britain has its land question, we have the money 
question to be determined ; both appalling in the conse- 
quences that may ensue from a false policy. 

May not the record of history in both cases be the same, 
— that the principles of liberty and the sentiment of per- 
sonal independence are so fully ingrained in the English 
race as to enable both branches to surmount the obstacles 
which their own legislators have placed in the way of their 
progress ? 

Whether the money be good or bad, whether the land be 
free or restricted, whether vested wrongs be sustained for a 
time, or vested rights promoted, — the sentiment of personal 
independence and individual liberty may be depended upon 
as the great safeguards of the English race, and will ulti- 
mately assure righteous laws. 

In the first lecture which I gave you this year, I en- 
deavored to picture to you the beneficent function of the 



228 BANKS AND BANKING, 

railroad and the steamship, in assuring a good subsistence 
to the people of many lands and far-distant places. 

In this I have treated the more abstract method by which 
distribution is promoted. 

In the merely material work of the railroad, skill and in- 
telligence only may suffice, but the conduct of the bank 
calls also for character and integrity of the highest order. 
In the history of commerce the great banker may, perhaps, 
stand first among those who have guided the great ex- 
changes of the world, and who have made civilization pos- 
sible. 

EDWARD ATKINSON. 

Brookline, Mass., March, i88a 



THE RAILWAY, THE FARMER, 
AND THE PUBLIC 



By EDWARD ATKINSON 



[Reprinted from the Manufacturers' Gazette of Saturday, August 9, iJ 



229 



THE RAILWAY, THE FARMER, AND THE 

PUBLIC. 



The present condition of business, which may be called a 
partial commercial paralysis rather than an acute commercial 
crisis, the reduction in the prices of some of the most necessary 
articles of clothing and of food since 1882, the actual acute 
crisis in the stock-market, and the enormous reduction in the 
prices of railway securities, all alike point to subtle and power- 
ful causes of change, perhaps of a permanent character, which 
cannot be explained by any superficial consideration of 
" corners," so called, or of the work of " bulls and bears," 
either in produce or in railway stocks or bonds. It is prob- 
ably beyond the power of any investigator to make a com- 
plete analysis of all the forces which have produced these 
results. The utmost which can be done is to give a direction 
to thought and observation, leaving to the future to disclose 
the actual facts in all their bearings. 

In pursuance of this great subject, let us first consider 
some of the most potent causes of permanent change in 
respect to the production and distribution of the necessary 
articles pertaining to the subsistence of the people, which 
have occurred since the end of the war. Food, clothing, and 
shelter are the subjects of primary consideration. Fuel is 
secondary in its application to household economy, but is of 
the first importance in the production of metals. With 
respect to food : Prior to the invention of the railroad and 

231 



232 THE RAILWAY, THE FARMER, AND THE PUBLIC. 

for a long period afterward — or until the railway service of 
the United States became finally and fully connected, East 
and West, which was about the year 1861, — the greater part, 
of the substantial food of each community was of necessity 
produced within a short distance of each town, city, or popu- 
lous centre, owing to the necessary cost of distributing corn, 
meat, and dairy products in bulk by wagons. Under these 
conditions the best land in each State, or even in the sepa- 
rate sections of each State, near towns or cities, was of neces- 
sity devoted to the production of the coarser staples, /. c, 
Indian corn, hay, meat, potatoes, and the like. The central 
parts of New York State and many parts of Pennsylvania 
were the sources of the greater part of the supply of wheat, 
but Western corn was unknown in Eastern markets. As 
distribution became less costly, especially after the final con- 
solidation of the railway service in 1869, those coarser and 
more bulky products of agriculture became in a sense border 
or pioneer crops, and much land which had previously been 
devoted to their production in the East was now released 
and became used for market gardens, small fruits, and for 
other purposes. Central New York still produces as m'jch 
wheat as ever, but a vast addition has been made of other 
salable crops, and agriculture is much more profitable than 
when wheat was the principal salable or money crop. The 
final consolidation of great railway systems took effect after 
the war, about the years 1S69 and 1870, and in a treatise 
entitled " The Railway and the Farmer," published by the 
writer in 1881, he pictured in the graphical method the 
coincidence in the increase of the great grain crops of the 
country with the extension of the railway mileage. This 
coincident increase went on from 1865 to 1S80, from over 
1,100,000,000 to over 2,400,000,000 bushels, culminating in 
that year in the production of the largest grain crop ever be- 
fore raised in the United States, and scarcely exceeded since. 



The railway, the farmer, and the PUBUd. ^33 

Throughout this period there was a constant reduction in 
the charge for railway service, accompanied by a vast increase 
in the quantity of grain and other produce moved ; but, meas- 
uring the prices by the gold standard, there was no substantial 
decrease in the price in the East of the principal farm pro- 
ducts of the West. These facts will duly appear by the 
consideration of the graphical tables and the figures sub- 
mitted herewith. Attention is especially called to the 
changes which occurred from 1869 to 1880 inclusive. It will 
be remembered that the year 1880, following the resumption 
of specie payments, was a year of great prosperity in every 
branch of production, whether in agriculture, mining, manu- 
facturing, or in that part of the production or leading forth of 
useful commodities to the service of man which is commonly 
called distribution. All the work which is performed under 
either of these names is but a conversion of forces, /. e., moving 
something from the soil or the mine for the use of man. 

TABLE I. 
GRAIN CROPS OF THE UNITED STATES. 

Maize, Wheat, Rye, Oats, Barley, Buckwheat. 



Year. 


Bushels. 


1865 


1,127,499,187 


1866 


1,343,027,868 


1867 


1,329.729,400 


1868 


1,450,789,000 


1869 


1,491,412,100 


1870 


1,629,027,600 


.871 


1,528,776,100 


1872 


1,664,331,600 


'873 


1,538,892,891 


1874 


1,455,180,200 


187s 


2,032,235,300 


1876 


1,962,821,600 


1877 


2,178,934,646 


1878 


2,302,254,950 


1879 


2,434,884,541 


i8So 


2,448,079,181 


1881 


2,066,029,570 


1882 


2,699,394,496 


1883 


2,623,319,089 


1884 


2,981,920,332 



234 THE RAILWAY., THE FARMER, AND THE PUBLIC. 

TABLE 2. 

MILES OF RAILROAD IN OPERATION ON THK IST JANUARY IN EACH YEAR AND THE MILES 
ADDED IN THE YEAR ENSUING. 



i^bS 


33,goS 




1,177 


i£66 


35,085 




1,710 


1867 


36,801 




2,449 


1S68 


39,250 




2,979 


1869 


42,229 




4,615 


1870 


46,844 




6,070 


1871 


52,914 




7,379 


1872 


60,293 




5,878 


1873 


66,171 




4,107 


1874 


70,278 




2,105 


1S7S 


72,383 




1,713 


1876 


74,096 




2,712 


1877 


76,808 




2,2Sl 


1878 


79,089 




2,687 


1879 


81,776 




4,721 


1880 


86,497 




7,048 


18S1 


93,545 




9,789 


1882 


103,334 




11,591 


1S83 


i'4,';'2i 




6,6:8 


1884 


121,543 




* 4,000 


1885 


125,543 



* Subject to a slight change on final computation. 



THE RAILWAY, THE FARMER, AND THE PUBLIC. 235 

What then has happened since the year 1880 ? Railway- 
mileage has increased since Jan. i, 1880, over forty per cent. 
The crops of grain increased in 1882 ten per cent, as com- 
pared to 1880, and in 1883 a little over seven per cent., and 
yet these crops are more than ample to meet the present 
demand of the country; and since 1880 there has been first 
a rise and then a small reduction in the price of the leading 
farm products, as will appear by consideration of the graphi- 
cal tables given herewith. The thirteen tons of beef, pork, 
wheat, corn oats, butter, wool, and lard which have 
been taken as the unit in this consideration, which were 
worth $632.68 in gold in 1869, $631.32 in 1880, $776.13 in 
1882, are now worth (June 15, 1884) $621.75. That these 
prices have been even so well maintained at this time gives 
proof of the continued prosperity of agriculture in spite of 
adversity elsewhere. The charge for moving these products 
on the principal railroads has fluctuated but Jittle since 
1879; it may be at this moment a little less than at that 
time, but if the charge is now less it is below the cost of 
the service and cannot be continued. Our great production 
of grain at less and less cost, and our great reduction in 
the charge for distribution, have been met since the year 
1880 by increasing crops in other countries, coupled with 
improved methods of distribution, not, it is true, equal to 
our own, but yet working a possible future change in all the 
conditions of agriculture in this country so far as the wheat 
crop is concerned. 

In the treatise upon "The Railroad and the Farmer" 
several computations were made as to the number of dollars 
which this reduction in the railway charge represented. It 
is something enormous. Had the actual quantity of mer- 
chandise moved by the railroad in the year 1880 been sub- 
jected to the average rate per ton per mile which was 



236 THE RAJLWAY, THE FARMER, AND THE PUBLIC. 

charged from 1866 to 1869 inclusive, the difference would 
have amounted to at least $500,000,000 and perhaps $800,- 
000,000 more than the^actual charge of 1880; and yet, up 
to this period, the prices of leading farm products had not 
been substantially affected by this enormous change, — that 
is to say. Eastern consumers of Western productions as yet 
received no benefit from this great reduction in the cost of 
distribution. But while consumers in the East may have 
as yet received little benefit in a direct reduction in the 
prices of Western produce, yet indirectly the benefit has 
been measureless. The grain and meat needed for a year's 
subsistence of one person, which would have cost a large 
portion of the time and labor to raise upon a comparatively 
sterile soil, to which agricultural machinery can be applied 
in least measure, is moved a thousand miles for a sum 
equal only to one day's wages of a common laborer. On 
the other I?and, we import annually articles which are free 
of duty to the amount of $200,000,000 and one third of 
dutiable imports of the value of $150,000,000, which are 
either articles of food or crude materials which enter into 
all the processes of domestic industry, and these are all 
bought and paid for with the excess of grain, meat, and 
dairy products which we could not eat, the excess of cotton 
which we could not spin, the excess of oil which we could 
not burn, all of which would either be not produced or 
would be wasted if the low charges upon our railroads did 
not enable us to export them. 

The consolidation and more effective service of the rail- 
ways of the United States has been in the nature of a great 
and novel invention, and it has worked, as all great inven- 
tions work, for the time being, namely, to the immediate 
benefit of a relatively small part of the community, — that is 
to say, to the producers of particular substances. It is, 



THE RAILWAY, THE FARMER, AND THE PUBLIC. 237 

perhaps, now working as other great inventions work in the 
secondary stage, namely, more to the benefit of the con- 
sumers. And yet even this is doubtful. The rapid in- 
crease in our home consumption seems to be suf^cient to 
maintain prices, even when exports are greatly lessened. 
The world will, however, hereafter be less subject to local 
scarcity, less subject to particular famine ; and a great mass 
of consumers of food may hereafter be required to devote 
a less proportion of their own labor to procuring the great 
staple articles of food. The forces in action in this matter 
have, therefore, been vastly greater than have appeared 
upon the surface, and a temporary retardation in the work- 
ing of these forces by corners in grain and the like have 
been insignificant incidents of little permanent consequence. 
Let us now consider the influence of these changes and 
of other great changes in their effect upon the railroads 
themselves. From a compilation of the statistics given in 
the census of 1880, coupled with a consideration of the data 
contained in Poor's Railway Manual, it is manifest that the 
staple articles of food — corn, meat, and dairy products — 
constitute, at least, fifty per cent, of the tonnage moved 
over all the railroads of the United States. They of 
course constitute a much larger proportion on some rail- 
roads than on others. Coal and timber in its various forms 
constitute not less than thirty per cent, of the remainder, 
and probably a yet larger proportion. If we reduce bushels 
to tons we find that the present average grain crop of the 
United States weighs 75,000,000 tons. Hay weighs from 
30,000,000 to 35,000,000 tons; it is not all moved by the 
railway in its primary form, but if we add to the hay which 
is moved its product in the secondary form of meat and 
dairy products, we find a probable tonnage of 30,000,000 to 
40,000,000 tons. It is more difBcult to convert the timber 



238 THE RAILWAY, THE FARMER, AND THE PUBLIC. 

products into tons, but approximately coal and timber to- 
gether amount to over 100,000,000 tons. We therefore have 
over 200,000,000 net tons of food, fuel, and materials for 
shelter to be moved by a railway, at some point or in 
some part of their distribution, even if they have been 
moved part way by water on the road from producer to 
consumer. On the other hand, the entire production of 
metals within the limits of the United States is less than 
six million tons, cotton less than two million, wool less 
than half a million ; and although these articles are con- 
verted into many different forms, and are moved twice, 
thrice, four times, or more, yet in the aggregate, after allow- 
ing for all duplications, they cannot amount to over twenty 
per cent., as compared to grain, timber, and coal, eighty 
per cent. From the census data and from the figures of 
Poor's Manual it would be difficult to make out over fifteen 
per cent, of miscellaneous merchandise in weight, consist- 
ing of metals, fibres, machinery, fabrics, and miscellaneous 
goods and wares, as compared to eighty-five per cent, in 
weight of food, fuel, timber, and other primary or crude 
products of the field, the coal mine, or the forest. 

Now, then, if the grain, hay, and meat product — that is, 
the food of the people — constitutes one half the substance 
moved by the railway, and if this product has not increased 
in any measure beyond ten per cent, during the last four 
years, in which period the railway mileage has increased 
forty per cent., we have a sufficient explanation of all the 
disturbance in railway stocks and bonds. Moreover, a very 
large proportion of the railway construction from 1869 to 
1880 inclusive represented a very much higher actual outlay 
or cost than the actual outlay or cost of what has been con- 
structed since. The extreme example of this change is to 
be found in the reduction of the price of steel rails from 



THE RAILWAY, THE FARMER, AND THE PUBLIC. 239 

over $150 a ton to less than $30 in gold, with a correspond- 
ing decrease in the cost of all the metal work pertaining to 
railways. 

Now, it matters not how much may be the nominal 
amount of the stock and bonds issued either before or since 
1880. It matters not whether a half or two thirds or three 
fourths even of any railroad is represented by what is called 
watered stock or not. All these enterprises are now brought 
face to face with the simple question — Is there enough 
material to be moved, adjacent to their respective lines, at ex- 
isting rates of freigJit , by which an income on actual cost can 
be earned, basing such cost upon what it would now be if the 
roads were constructed to-day ? It may be that watered 
stock, so called, which was issued before the great reduction 
in railway charges, may now be sustained by actual intrinsic 
value of double-track, equipment, or connections, since paid 
for out of earnings ; or it may be, as in the case of the New 
York Central Railroad, that the right of way and terminal 
real estate is now worth a very large share, if not as much 
as all the outstanding stock and bonds; this does not alter 
the main question as above stated. 

It will presently be made apparent that the charges for 
moving merchandise on long-established and fully equipped 
roads had been reduced in 1879 ^^ ^^e lowest possible terms 
consistent with even a small profit ; therefore all new roads 
are met by one of three questions : First, if extensions into 
new sections, will the prices of possible products warrant 
the movement of crops except at rates which will barely 
sustain the road on a basis of cash cost ? Second, if parallel 
roads, are they capable of being sustained at all ? Third, if 
new roads in a section already well furnished, is there local 
traffic enough to pay even simple interest on a cash cost ? 
In other words, have we not entered upon the final period 



240 THE RAILWAY, THE FARMER, AND THE PUBLIC. 

in the history of railroads, to wit : the period in which they 
must be treated by their owners on a strictly commercial 
basis for the purpose only of earning a moderate income on 
the actual cash cost ? 

Before pursuing the subject further, with a view to con- 
sidering the reasons why we may perhaps expect a speedy 
return of substantial prosperity after the railway system has 
become adjusted to these new conditions, I now submit cer- 
tain tables which were originally constructed for an article 
on the " Railroad and the Farmer," published in i88i, which 
tables have been corrected and extended to the present 
date. I am indebted to the following authorities for the 
data on which these tables are based : The Department of 
Agriculture of the United States; E. H. Walker of the 
Produce Exchange of New York ; Poor's Railway Manual ; 
Messrs. Mauger and Avery of New York and Boston ; G. 
R. Blanchard of New York; H. Sabine, Railroad Commis- 
sioner of Ohio ; the reports of the Iron and Steel Associa- 
tion ; and the United States Census of 1880. 

The grain crops having increased only an average of five 
per cent., while the railway mileage increased more than 
forty, a part of which extension consisted of new routes 
from West to East, we may naturally look for a reduction 
of the tonnage on any principal route between West and 
East, and this we find even on the Lake Shore and New 
York Central, as will appear by tables 3 and 4. 



TABLE 3. 

LAKE SHORE & MICHIGAN SOUTHERN RAILROAD. — ACTUJl.L TONS MOVED. 
Tons 

Increase of Tons Moved 
Consolidated in this year. 



Yr. 


Miles. 


Moved. 


'69 






'70 


I1O13 


2,978,72s 


'71 


r,o73 


3,784,52s 


'72 


1)136 


4,443,092 


'73 


1,154 


5,176,661 


'74 


1,175 


5,221,267 


75 


1,176 


5,022,490 


'76 


1,177 


5,635,167 


'77 


1,177 


5,513,398 


'78 


1,177 


6,098,445 


'79 


1,177 


7,541,294 


'80 


1,177 


8,350,336 


81 


1,177 


9,164,508 


82 


1,274 


9,195,528 


83 


1,340 


8,478,605 



LAKE SHORE & MICHIGAN SOUTHERN. — TONS MOVED ONE MILE. 
year. Tons Moved one Mile. Increase of Traffic, Tons per Mile. 



1870 


574,035,571 


I87I 


733,670,696 


1872 


924,844,140 


1873 I 


053,927,189 


1874 


999,342,041 


187s 


943,236,161 


1876 1 


133,834,828 


1877 I 


080,005,561 


1878 I 


340,467,826 


1879 I 


733,423,440 


1880 1 


851,166,018 


1881 2 


021,775,468 


1882 1 


892,868,224 


1883 I 


689,512,415 



LAKE SHORE & MICHIGAN SOUTHERN. — CHARGE PER TON PER MILE, 
AVERAGE UPON ALL CLASSES OF MERCHANDISE. 



Year. 



Freight 
Receipts. Charg;e. Decrease of Charge per Mile. 





DDLS. CTS. 


1870 


8,746,126 I 


504 


I87I 


10,341,218 I 


391 


1872 


12,824,862 I 


374 


1873 


14,192,369 I 


335 


1874 


11,918,350 I 


180 


1875 


9,639,038 I 


010 


1876 


9,405,629 


870 


1877 


9,476,608 


864 


1878 


10,048,952 


734 


1879 


11,288,261 


642 


1880 


14,077,294 


750 


1881 


12,659,987 


617 


1882 


12,022,577 


628 


1883 


12,400,094 


728 



24? 



TABLE 4. 

NEV/ YORK CENTRAL & HUDSON RIVER RAILROAD. 

Tons 
Yr. Miles. Moved. 

'69 842 3,190,840 — 1 »" ■ mrmn. ur i . i 'ji m ag 

'70 842 4,122,000 H ill i i ii u iii nu I i m iiiiiiii^ 



-ACTUAL TONS MOVED. 



74 1 
'75 1 


•76 I 


'77 I, 


'78 I, 


'79 I 


'80 I, 


'81 


'82 


'83 



844 4.532,056 
850 4093.905 
858 5,522,724 

000 6,114,678 

000 6,001,984 

000 6,803,680 

,oco 6.351,356 

poo 7,635,413 

000 9,005,753 

,coo 10,533,038 
993 11.591.379 
993 ".330.393 
993 10,892,440 



NEW YORK CENTRAL & HUDSON RIVER RAILROAD. — TONS MOVED ONE MILE. 



869 589,362,849 

870 769,087,777 

871 888,327,865 

872 1,020,908,885 ■ 

873 1,246,650,063 

874 1.391.560,707 

875 1,404,008,029 

876 1,674,447,055 

877 1,619,948,685 

878 2,042,755,132 

879 2,295,827,387 

880 2,525,139,14s 

881 2,646,804,098 

882 2,394,799,310 

883 2,200,896,780 



NEW YORK CENTRAL & HUDSON RIVER RAILROAD. — CHARGE PER TON PER MILE. 
AVERAGE ON ALL CLASSES OF MERCHANDISE. 

Decrease of Charge per Mile. 



i^ear. 


Receipts. 


Charge. 




DDLS. 


CTS. 


1869 


14,066,386 


2.387 


1870 


14.327.418 


1-853 


1871 


14.647,580 


1.649 


1872 


16,259,650 


1.592 


1873 


19,616,018 


1-573 


1874 


20,348,725 


1.462 , 


1875 


17,899,702 


1-275 


1876 


17.593.265 


1.051 


1877 


16.424,317 


1.014 


1878 


19.045.830 


.930 


1879 


18,270,250 


.796 


1880 


22,199,966 


.879 


1881 


20.736.750 


•783 


1882 


17,672,252 


-738 


1883 


20,142,433 


.910 



242 



THE RAILWAY, THE FARMER, AND THE PUBLIC. 243 

It will be observed that so long as the increase of crops 
kept pace with the increase of railroads, and both were ac- 
companied by such an export demand for breadstuffs as to 
maintain the through trafific, the rate of charge diminished, 
but when the trafific diminished the rate of charge soon 
began to show a slight increase. This is, doubtless, 
caused by the change in or less proportion of through 
trafific. The following table shows that while the traffic on 
the New York Central and Lake Shore decreased in some 
measure in 1882 and 1883, y^t the trafific on all the roads 
reporting in New York increased. The data hereafter 
given from the statistics of ' Ohio, in which the through 
and local tonnage are separated, also fully sustain this view, 
and show how railroads which may at first be mainly sup- 
ported by through trafific are ultimately supported mainly 
by local traffic. Table 5 shows the continued increase of 
trafific on all railroads reporting in the State of New York, 

This table includes some roads of which only a small 
part actually lies within the limits of the State. 

The following table. No. 6, gives the earnings, expenses, 
and profits per ton per mile on the New York Central and 
Hudson River Railroad in 1855, 1865, and from 1869 to 
1883 inclusive. 

It will be manifest that when such a strong and rich cor- 
poration as this has been forced to do its work for the last 
five years at a profit of less than a quarter of a cent per ton 
per mile, or one fortieth of a cent profit for moving a barrel 
of flour one mile, there is ho margin for any further reduc- 
tion of any moment; and it also becomes apparent that the 
construction of a parallel line for the purpose of sharing this 
work was a pure waste of capital — an imposition upon the 
purchasers of the securities, and that the ruin of its pro- 
moters might have been foretold at the beginning, as it was 



244 THE RAILWAY, THE FARMER, AND THE PUBLIC. 







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THE RAILWAY, THE FARMER, AND THE PUBLIC, 245 




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246 THE RAILWAY, THE FARMER, AND THE PUBLIC. 



by more than one observer. By whom this great reduction 
in freight charges has been mainly or directly enjoyed will 
appear from the following computation of the value of thir- 
teen tons of staple produce, and the comparison of the 
freight charge thereon. It must, howe\^er, be remembered 
that the greater reduction has been made on the through 
traffic on grain and provisions than on any other class of 
traffic, hence the tables do not show the full benefit to the 
Western producers. 

TABLE 7, 

COST OF 20 BARRELS OF FLOUR, lO BEEF, ID FORK, 100 BUSHELS WHEAT, lOO 
CORN, 100 OATS, 100 POUNDS BUTTER, lOO LARD, AND lOO FLEECE WOOL, 
IN NEW YORK CITY, AT THE AVERAGE OF EACH YEAR, COMPILED BY 
MONTHS, IN CURRENCY AND GOLD ; COMPARED GRAPHICALLY WITH THE 
DECREASE IN THE CHARGE PER TON PER MILE ON THE NEW YORK CENTRAL 
& HUDSON RIVER RAILROAD, DURING THE SAME PERIOD. 

Cost in 
Year. Currency. 



1869 $845.58 

1870 8gi.8o 



1871 
1872 
1873 
1874 
187s 
1876 
1877 
1878 
1879 



1884 



821.60 
760.24 
755.68 
831.98 
800.28 
727.49 
780.29 
S75-4I 
568-34 
631.32 
703.10 

776-13 
662.11 
621.75 



[June] 



Decrease in the charge per Ton per Mile, N. Y. 
C. & H. R. R. R.— In Currencv. 



1869 


2.38 


1870 


1.85 


I87I 


1.65 


1873 


1-59 


1873 


1-57 


1874 


1.46 


1875 


1.27 



In Gold. 

$632.68 . 
776.02 ■ 

735-33 ■ 

675.92 • 

662.50 ■ 

748-54 " 

696.40 

651.74 

751-95 

569-81 I 

568.34 ' 

631.32 

703.10 

776.13 

662.11 

621.75 ' ' ■■» ■ ' ' ■■ 

Decrease in the charge per Ton 
per Mile, N. Y. C. & H. R. 
R. R.— In Gold. 
1.78 c 
1.64 
1.40 



41 



THE RAILWAY, THE FARMER, AND THE PUBLIC. 247 



1876 1 


OS 


1877 I 


02 


1878 


93 


1879 


79 


1880 


88 


I88I 


78 


1882 


73 


1883 


91 



Freight charge in year 1855, in 
gold 3,27 cts 

Freight charge in year 1865, in 
currency, 3.45 cts 



To whom the advantage has accrued will be made yet 
more clear by setting off the actual dollars of freight charges 
on thirteen tons moved 1,000 miles, or from Chicago to 
New York or Boston, at the average rates charged by the 
New York Central & Hudson River Railroad on all classes 
of traffic from 1869 to 1883, inclusive, using gold values only 
in respect to prices and rates. 

TABLE 8. 

PRICES IN GOLD IN THE NEW YORK MARKET OF 20 BARRELS FLOUR, EXTRA 
STATE, 100 BUSHELS WHEAT, MILWAUKEE CLUB, lOO BUSHELS CORN, WEST- 
ERN MIXED, 100 BUSHELS OATS, lO BARRELS MESS PORK, lO BARRELS MESS 
BEEF, 100 POUNDS LARD, lOO POUNDS STATE DAIRY BUTTER, lOO POUNDS 
MEDIUM WASHED CLOTHING WOOL, COMPARED WITH CHARGE REDUCED TO 
GOLD OF MOVING THE ABOVE QUANTITY, EQUAL TO I3 TONS I.OOO MILES, 
AT THE AVERAGE RATES CHARGED BY NEW YORK CENTRAL & HUDSON 
RIVER RAILROAD, I869 TO 1S83, INCLUSIVE. 





Cost 


Year. 


In Gold 


1869 
1870 


$662.68 


775.02 ■ 


1871 


735-33 ' 


1872 


675.92 


1873 


662.50 


1874 


748-54 


1875 


696.40 


1876 


651-74 


1877 


751-95 ■ 


1873 


569.81 


1879 


568.34 . 


1880 


631.32 


1881 


703.10 


1882 


776.13 


1883 


662.11 


1884 


621.75 



Prices. 



Decrease in the Charge per Ton per Mile, 
N. Y. C. & H. R. R.— In Gold. 

; cts. 1 ..f ,«tuw-».tjrii.-.',u ' „' r!g^^M^ 
.64 



[June] 



248 THE RAILWAY, THE FARMER, AND THE PUBLIC. 

Per cent, of Freight 

Dollars, 13 Tons, Charge to Value in 

Year. 1,000 Miles. New York. 

1869 231.40 36.61 ^^i^^^^mm^i^^^m^mmimmm^^^^^^^^m^im^ 

1870 213.20 27-47 «=^^"»^«^"""^^^^"^""^"^^^^^^^^ 

1871 182.00 24.76 •^■^^^D^^— ^^^^— ^«— ■^-^—o^ 

1872 183.30 27.16 

1873 179-40 27-05 

1874 I70-30 22.73 
187s 144-30 2°-73 ' 

1876 122.20 18.74 I 

1877 126.10 16.76 

1878 119.60 20.98 

1879 102.70 18.08 
18S0 114.40 18.12 
1881 107.40 15-27 

i88a 94-90 12.22 

1883 118.30 17.87 



The above proportions of the value of the produce ab- 
sorbed by the freight charge should be reduced in just the 
measure that the rates per mile on the movement of grain 
and meat have been less than the average charge on the 
whole traffic. For instance, thirteen tons of grain have 
been brought from Chicago to New York at a lower charge 
by far than any of the above figures. This change would 
reduce the proportion of the charge now in greater meas- 
ure than in the earlier part of the period under considera- 
tion. 

But it may be said all these data are limited to the through 
traffic, and the local traffic is still subjected to onerous 
charges and unjust discrimination. In reply to which I sub- 
mit Table No. 9, in which the receipts, expenses, and profits 
of all the railroads reporting in New York are analyzed and 
compared, by which it will appear that in 1879 ^he profit on 
all the traffic was brought down to less than one quarter of 
a cent per ton per mile, and has averaged less than that rate 
ever since. What it may be this year cannot yet be 
stated, 



THE RAILWAY, THE FARMER, AND THE PUBLIC. 249 



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THE RAILWAY, THE FARMER, AND THE PUBLIC. 251 



Had the rate of 1870 been charged on the traffic of 1883, 
the sum would have been at 1.7016 on 9,286,216,628 tons, 
carried one mile, $158,014,262 ; the actual charge was 
$83,464,919, making a difference of $74,549,343 saved on 
one year's traffic on the lines reporting in New York. 

But again, let us examine the traffic of the great State of 
Ohio, midway between the grain fields of the far West and 
the manufacturing States of the far East, a State in which 
agriculture, mining, and manufacturing are combined. The 
invaluable tables of her Railroad Commisioner, Mr. Sabine, 
separate the through from the local traffic, and these tables 
show how, in the course of time, all our existing railway 
lines, except such speculative absurdities as those which 
have been built close alongside other tracks, may become 
self-sustaining and profitable. 

Again we find that the average freight charge has been 
reduced to a little less than one cent per ton per mile, and 
there it has substantially rested for seven years, because it 
cannot go lower without stopping the traffic altogether. 

TABLE 12. 




Tons per mile in \l 
At actual rate of 18 



3. 8,577,357,803, at 1869 rates, 2.446 
i, .875 . . . ■ . . . 



Difference 



$201,800,000 
67,000,000 

$134,800,000 



252 THE RAILWAY, THE FARMER, AND THE PUBLIC. 

At currency rate of 1869 reduced to gold, 1.80 .... $156,400,000 
Actual 67,000,000 

Difference $89,400,000 

Difference on local traffic only . , $60,000,000 

And once more we prove that, had the freight charge of 
1869, reduced to gold, been put upon the traffic of 1883, the 
results would have been, in round figures, as follows : 

8,577.357.803 tons moved i mile, at 1.80 cts. per ton per mile . $156,400,000 
Actual charge .......... 67,000,000 

Difference $89,400,000 

As two thirds of this was on local traffic the people of 
Ohio saved, in the single year 1883, $60,000,000 on their 
internal exchanges only. The ton mileage of New York 
and Ohio combined, in 1883, was as follows on all the roads 
reporting in each State : 

New York, tons I mile ........ 9,286,216,628 

Ohio, <• 8,577,357,803 

Total 17,863,574,431 

Saving in New York as compared to gold rate of 1870 . . $74,549,343 
Saving in Ohio, as compared to gold rate of i86g . . . 89,400,000 

Total $163,949,343 

The reports of these two States covered about four tenths 
of the total ton mileage of the whole country in 1883, which 
was 42,361,068,260 tons carried one mile at a charge of 
$549,339,736. As great a reduction, or even greater, has 
been made on all roads which were in existence from 1866 
to 1870, while the new roads have worked a yet greater 
saving, because they take the place of traffic by wagons or 
by rivers. At the ratable difference made on the New 
York and Ohio railways, the traffic of the whole country 
in 1883, which was done for the sum of $549,339,736, 
would have cost $950,000,000, or $400,000,000 more. 



THE RAILWAY, THE FARMER, AMD THE PUBLIC. 253 

As we go back to the yet higher rates of 1866, 'Gy, and 
'68, the difference rises to $600,000,000 ; if we compare the 
gold rates now with the currency rates then, the difference 
is yet more — even more than $800,000,000. 

Again, I call attention to this as the true source of our 
increased power of subsistence — as the main source of our 
actual increase in capital, and also the source whence has 
come the fund for railway construction. Only a small part 
of this fund has been wasted ; the speculative enterprises by 
which parallel lines have been built too near to existing 
lines ever to be of any value are limited to a few which any 
one, who is familiar with names, can identify. By far the 
larger portion, even of the forty-per-cent. extension in four 
years' time, will ultimately justify their existence, and will 
be sustained with a moderate income on a cash cost ; but 
the day of profit on two, three, or four dollars of security 
issued for one paid in, has passed, let us hope, forever. 

These tables could be extended to almost any extent ; all 
the great lines show identical results, but it would be useless 
to multiply proofs. Let these suffice to show that the dema- 
gogue who seeks to gain place and power by the support 
of those who are misled by the false statements and perver- 
sions of fact, of what are known as " anti-monopoly 
leagues," maybe rendered powerless by a clear presentation 
of facts. These tables have not been prepared at the 
instance of any railroad corporation, but simply under a firm 
conviction of the intelligence and honest purpose of the mass 
of the voters of this country, under whatever party name 
they are enrolled. These dry and voluminous statistics are 
presented with an assurance that they will be honestly con- 
sidered, and will lead men to beware of meddlesome legisla- 
tion affecting the most beneficent force by which a good 
subsistence is made common to all at the least cost. 



254 THE RAILWAY, THE FARMER, AND THE PUBLIC. 

In what follows I shall be obliged to repeat some of the 
data- already given, in order to sustain the distinct and 
separate purpose of the remainder of this essay. 

In connection with the foregoing figures I have been 
asked to give my views of the future immediate prospects 
of business in this country. What are such views worth ? 
For any immediate application, absolutely nothing. Ask 
the apple-woman what apples will be worth next autumn, 
and her views may be worth as much for any immediate 
application as those of the most sagacious banker or mer- 
chant in the city. But a few facts may be given which have 
a bearing on the course of business during the next five 
years. I will give them for what they are worth, and every 
reader can draw his own deductions from them. Such facts 
may only be of use in estimating industrial forces covering a 
considerable period. The facts which caused the panic of 
1873 were just as apparent in 1870 as they were during its 
action, but its exact date could not be foreseen. The long 
period of necessary depression, while the depreciation of 
the currency was being corrected, could be as clearly appre- 
hended before 1873 as it could be during its continuance 
until 1879. The "boom " of 1880 was an obvious necessity, 
and was easily predicted in 1878 and '79, The commercial 
" paralysis " of 1883, and the railway panic ensuing in 1884, 
were both apparent and were foretold in the winter of 1881, 
although no date could be established in advance. With 
equal certainty the commercial activity, perhaps of 1885, 
and the exceeding prosperity which must ensue, may be 
predicated on existing conditions, were it not for two un- 
certain factors. These are : 

First, The silver question. 

Second, Uncertainty in regard to the future financial 
policy of the Government. 



THE RAILWAY, THE FARMER, AND THE PUBLIC. 2$^ 

In respect to the first there is still time to prevent the de- 
basement of the standard of value to the level of a dollar 
of light weight, worth but little more than eighty cents in 
gold ; but every year's delay will bring the country nearer 
to the inevitable disaster which must ensue from our exist- 
ing acts of legal tender and coinage. 

In respect to the second danger a few months will tell ; 
in the meantime, constructive enterprise vjiWv^dat the decision 
of the people as to whether their policy shall be one of 
peace, prosperity, reduced taxation, and recuperation ; or 
one of uncertainty, probable aggression, possible war, and of 
the perversion of the functions of government to purposes 
of personal ambition and private gain. What effect a 
temporary cessation of constructive enterprise exerts will be 
fully treated hereafter. Assuming that both these special 
causes of disaster, of want of confidence, and of continued 
depression may be avoided, a period of great future pros- 
perity may be predicated on present conditions, although 
no man can tell when the exact turn of the tide will come. 

In order to comprehend the present conditions under 
which this country is now making greater real progress in 
material welfare than at almost any previous period in its 
history, certain elements must be considered in their rela- 
tive proportions ; for this purpose some figures of the census 
may be used. In respect to these figures it must be 
premised that the valuation of farms is probably under-esti- 
mated, that the capital in railways included the " water " 
which is now being squeezed out, and that the capital in 
manufactories was probably over-estimated. In considering 
the relation of proportion which these great branches of 
industry bear to each other we may therefore assume : 

First, That the proportion of the national capital in im- 
proved lands and farm buildings, i. e., in the instrumentality 
of primary production, is herein stated too low. 



256 THE RAILWAY, THE FARMER, AND THE PUBLIC. 

Second, That the capital in manufacturing, i, e.^ in the 
instrumentality of conversion of crude materials into finished 
goods, and the capital in railways, i. e., in the chief instru- 
mentality for distribution, are herein stated too high ; but 
that the figures of the census fairly represent their relation 
or proportion to each other. 

Omitting fractions, the respective capitals in these three 
great departments of industry were, in 1880, as follows, as 
given in the census : 

Farm lands and farm buildings .... $10,200,000,000 

Railways ........ 5,200,000,000 

Manufacturing (listed under 332 different heads) . 3,000,000,000 

Graphically represented, the relative proportion of these 
capitals is as follows : 



Farms 

Railways 

Manufacturing 



It will be observed that the valuation of the farms in- 
cludes the land ; if we separate farm buildings, machinery, 
tools, and appliances from land — that is to say, separate all 
the actual capital upon the farm from the land, and add this 
sum to the capital in manufactures, the total productive 
capital, in both agriculture and manufactures, was about the 
same, perhaps a little more, than the single capital in rail- 
ways. This brings into the clearest light the relative im- 
portance of distribution. In this country there is always 
enough for all, but where is it r* Our productive capacity is 
unlimited, and the main question is one of distribution. 
The railroad has solved a part of this problem, but there are 
more complex questions yet to be solved. It costs a third 
of the price of a baker's loaf to get a loaf of bread away 
from the oven, after it is baked, to the mouth of the con- 
sumer; but this is a side issue. [See appendix.] 



THE kAlLlVAY, THE FARMER, AND THM PUBLIC. 257 

Such being the relative proportions of capital in farming, 
manufacturing, and railways in 1880, what changes have oc- 
curred since, by which we may in part account for the great 
variations in the market value of either class of the above 
property ? especially the reduction in the nominal value of 
railway property ? How can we account for the railway 
panic, for the great private losses, and for the redistribution 
of property in railways, which is now going on? How can 
we account for the comparative stability in the value of 
manufacturing property of all kinds, and for the relative 
and actual prosperity of agriculture, the latter the most 
important factor of all in the condition of the country — 
the one great fact on which we may forecast future pros- 
perity ? 

The reasons are not far to seek. At the foundation of 
agriculture lies the grain crop. Grain, or its secondary pro- 
ducts, meat and dairy products, constitute the principal 
elements in weight of the tonnage of the railways. The 
average grain crop, from 1866 to 1869, inclusive, was 1,400,- 
000,000 bushels. The average railway mileage from 1866 
to 1869, inclusive, was 39,000 miles. The average grain 
crop from 1877 to 1880, inclusive, was 2,341,000,000 bushels. 
The average railway mileage from 1877 to 1880, inclusive, 
was 83,000 miles. The average grain crop of 1881 to 1883, 
inclusive, was 2,450,000,000 bushels. But our railway mile- 
age is now, or was on the ist of January, 1884, over 121,000 
miles. What are the necessary conclusions from these 
figures? 

From 1866 to 1880 one line after another was added to 
the great through lines from East to West ; slowly but 
surely, down to 1880, the railway mileage gained a little 
upon the grain crop, the slight excess representing nothing 
more than the necessary cross-roads and side-lines. The 



258 THE RAILWAY, THE FARMER, AND THE PUBLIC. 

markets of the world also kept even pace, increasing supply 
of grain and meat was met by increasing demand, down to 
1880 inclusive. In 1869 thirteen tons of produce, already 
listed, were worth in gold in the city of New York, $632.68 ; 
in 1880 the same quantities were worth $631.32. But in 
1880 the increase of demand culminated ; exports have 
fallen off about as fast as the home demand has increased, 
yet the same quantities of the same articles are worth at 
this time (June 15, 1884) $621.75, or less than two per cent, 
reduction. Observe, however, with only five per cent, in- 
crease in the average crop of grain since 1880, we have more 
than forty per cent, increase in the railway mileage in the 
last four [years. We have two tJiroiigh lilies where one is 
needed, and the end of speculative construction is therefore 
plainly to be seen. We have passed through the period of 
railroad inception and of detached sections or lines, through 
the period of consolidation, through the period of needed 
extension, through the period of the speculative promotion 
of useless parallel lines by means of construction companies ; 
and we have 7iow at last reached the period of adjustment 
to wholesome conditions and of construction limited to the 
necessity for cross-roads, side-lines, and special or local 
roads for the use of small districts. Even this latter need 
will probably require this year 4,000, afterward 5,000 to 
6,000 miles, to be added to our mileage every year. 

But while this vast extension in railway mileage has been 
in progress, the freight charges on all the railways of the 
country, and especially on the through lines, were reduced 
between 1869 and 1880 tzvo thirds; that is to say, the 
charge on the thirteen tons carried from West to East 1,000 
miles, which was over $180 in 1869, was less than $60 in 
1880, and has since fluctuated but little, sometimes a little 
less, sometimes a little more. In fact, there can hereafter 



THE RAILWAY, THE FARMER, AND THE PUBLIC. 259 

be no further great reduction in freight charges. The bot- 
tom was reached in 1880; the entire profit on the whole 
tonnage of the New York Central and Hudson River Rail- 
road, in 1882, was but a trifle over one eighth of a cent a 
ton per mile. In exact figures it was .1370 cents per ton 
per mile. That is to say, at the average rate of profit on 
the whole trafific, grain and flour being carried at much 
lower relative rates, the actual profit in 1882 for moving a 
barrel of flour 1,000 miles, or from Chicago to New York, 
was thirteen cents, or about one third part of the cost of the 
barrel in which the flour is packed. In 1880 the possibility 
of any further permanent reduction on established lines of 
railway therefore ended, until some new invention shall re- 
duce the cost of the service. So far as parallel or competing 
main lines have been constructed since that date the capital 
expended has been utterly wasted. 

The elimination of what has been called " watered stock 
and bonds," against which the silly crusade of the so-called 
anti-monopolists has been directed, is, therefore, in process 
of accomplishment by methods far more potent than any 
possible legislative acts, namely, by the triple competition 
to which railways are subjected : First, The competition of 
water-ways ; Second, The competition of one railway with 
another ; Third, The competition of product with product 
in the great markets of the world. The charge which can 
be put upon the wheat of Dakota or Iowa for moving it to 
market is fixed by the price at which East Indian wheat can 
be sold in Market Lane. The railway mileage Jan. i, 1880 
(when the possibility of any further reduction in freight 
charges covering any profit whatever commensurate with a 
fair but very low revenue was practically reached), was 86,- 
497, represented by over $5,000,000,000 of securities. Jan. 
I, 1884, it was^i2i,542 miles, represented by over $7,ooO;- 



200 THE RAILWAY, THE FARMER, AND THE PUBLIC. 

000,000 of securities. Since Jan, i, 1880, we have increased 
pur population twelve and a half \o fourteen per cent., our 
grain crops five per cent., our railway mileage forty per 
cent. Aside from grain, the increased production of other 
commodities has probably not averaged a greater rate than 
the increase in population. 

Having, therefore, reached the end of construction com- 
panies, of speculative building, and of the issue of two, 
three, or four dollars of security for one dollar actually paid, 
we are now entering upon a period of railway adjustment; 
that is to say, of earnings limited to a moderate rate of possi- 
ble dividend on what the needed portion of the present 
railroad mileage would cost at the present actual prices 
of labor and materials, unnecessary parallel roads being 
deprived of all earning capacity. 

How much nominal property will be wiped out of exist- 
ence, and how many individuals will suffer, it matters not, 
except to the sufferers. Hereafter, the people of the 
United States will be served by 120,000 miles of railway, 
operated at the lowest possible cost, and which will be 
extended only so fast as prudence or necessity may require. 
This service, which would have cost producers or consumers 
$1,000,000,000 gold to $1,350,000,000 currency a year at the 
rates which were charged from 1866 to 1869 inclusive, is now 
performed for about $550,000,000 per year, a saving of 
$450,000,000 to $800,000,000 per year. 

While this revolution has been accomplished, the leading 
farm products, of which I have given a list, thirteen tons in 
all, which were worth in gold coin in the city of New York 
in 1869 $632.68, and which are now worth $621.75, have 
averaged during the whole series of years $679.50. In this 
period of so-called depression and disaster it therefore 
appears that the prices of the staple products of our Western 



THE RAILWAY, THE FARMER, AND THE PUBLIC. 26 1 

farms and of our Eastern dairies in New York are but eight 
per cent, lower than the average of the last fifteen years. 
Upon the misfortunes of railway owners we may, therefore, 
predicate the past and present and also the future prosperity 
of the farmer ; and upon the prosperity of the farmer we 
may also assume the future prosperity of the manufacturer, 
because their interests are identical. But who can tell 
exactly when the beginning of another period of prosperity 
will become apparent? One answer may be given. Per- 
haps it will come only when the re-adjustment of the railway 
service has been finally completed by the refusal of respect- 
able men to share in the management or sit upon boards of 
directors with men of notoriously bad reputation, who have 
stolen the property of their stockholders, corrupted the 
courts, and rendered themselves unfit to hold any place of 
trust — however able they may. be. The severity of the 
present railway crisis is due to the support which men of 
repute have given to knaves — sometimes mistakenly, often 
knowingly. 

At the risk of unnecessary repetition, let me again call 
attention to the salient facts in respect to the State of Ohio 
which are disclosed in the admirable reports of her railway 
commissioner. I again call attention to these points, be- 
cause from them the restoration of value to many lines of 
railroad now embarrassed, may be implied. This State lies 
midway between East and West. In 1883 it contained 6,897 
miles of railroad, against 3,324 in 1869. In 1869, the actual 
tons moved over all the railways reporting in the State 
numbered 14,5 59,704, of which fifty-five per cent, represented 
local traffic and forty-five per cent, through traffic. In 1883, 
63,683,423 tons were moved, of which sixty-six and one-half 
per cent, represented local traffic and only thirty-three and 
one-half per cent, through traffic, showing how the local 



262 THE RAILWAY, THE FARMER, AND THE PUBLIC. 

traffic gains, both absolutely and relatively. The charge 
per ton per mile in 1869 was 2.446 cents; in 1883, only .875 
cents per ton per mile. Graphically the Ohio railroad 
traffic may be represented in this way : 

TONS MOVED. 



14,559,704 
Local 

Through 
T883 

63,683,423 
Local 

Through 



CHARGE PER TON PER MILE. 



2.446 
.875 



The actual freight charge on all the railroads reporting in 
Ohio in 1883 was, in round figures, $67,000,000. Had this 
traffic been subjected to the charge of 1869 the sum would 
have been $201,800,000. 

The difference between these two sums is, in currency, 
$134,800,000; in gold, $89,400,000. Now since two thirds 
of this traffic was local traffic, the saving in rates to the 
people of Ohio since 1869, on their local traffic only, was, in 
currency, $90,000,000 ; in gold, $60,000,000. 

This is the difference on the work done in a single year 
in a single State ! The commissioner may well say in his 
letter to me transmitting this information, " I am glad to 
say that in Ohio the people and the railways are at peace." 
The example of Ohio is a crucial instance of how the rail- 
ways have diversified the employment of the people, and 
how this very diversity afterward sustains the railways, as 
the local traffic steadily increases in its relative proportion. 
If such has been the gain in a single State — $60,000,000 saved 
on the local traffic of a single year, as compared to the rate 



THE RAILWAY, THE FARMER, AND THE PUBLIC. 263 

•tff only fourteen years since — the secret of increasing wealth, 
lower rates of interest on capital and increasing wages to 
the laborer, is not far to seek. Nor can depression or 
adversity long hold a place under such conditions, given 
only stability to the standard of value, judicious reduction 
of taxes, freedom from an aggressive foreign policy, and the 
limitations of legislative action to assuring the publicity of 
the accounts of public corporations, without futile attempts 
to control them. 

But to return to the adjustment of the value of railway 
property. Stocks and bonds, nominally representing $7,000,- 
000,000 worth of property, have apparently depreciated at 
least $1,500,000,000 within the present year, or in other 
words, perhaps $1,000,000,000 of " water " has been squeezed 
out, and during the process the true value of the remainder 
has been temporarily depressed $500,000,000, from which 
depression it must soon recover. Such vast changes, of 
which the conspicuous frauds of a few persons are but the 
surface indications (the greatest knaves not having even yet 
been ruined), could not fail to affect in a most profound de- 
gree all banks and other institutions of credit, and in less 
measure all who engaged in production and distribution. 
And yet no tradesman, no merchant, no manufacturer has 
yet failed who had not long been insolvent, and hardly a 
banker ; the prices of the staple farm products are almost 
the same as in 1869 and in 1880, the latter a year of great 
prosperity, and there have been few manufacturing accounts 
made up which showed an actual loss, while many branches 
of business are prosperous. There is no safer barometer 
than the production and consumption of iron. This branch 
of industry has been said to be more depressed than almost 
any other ; but what are the facts ? According to the records 
of the Secretary of the Iron and Steel Association, the pro- 



264 THE RAILWAY, THE FARMER, AND THE PUBLIC. 

duction of pig-iron in the last five years, which included 
the " boom " year 1879, "^^^ ^^ follows : 

NET TONS. 

1879 3.070,875 

1880 4,295,414 

I88I ^o 4,641,564 

1882 5,178,122 

1883 5,146,972 

Let it be observed that in the face of lower and lower 
prices, from 1880 to the present time, and in spite of a re- 
duction of nearly one half in the rails laid upon new rail- 
roads in 1883 as compared to 1882, the production and con- 
sumption of American iron in the year of so-called greatest 
depression, 1883, was sixty-six per cent, greater than in the 
" booming " year, 1879. The consumers of iron may well 
be satisfied with the construction of modern furnaces well 
placed, in which iron is made at so much lower cost that, in 
the face of eleven-per-cent. reduction in the price of 1880, 
the production of the metal which is at the foundation of 
all arts has increased twenty per cent. On such depression 
as this future prosperity may well be predicated. In 1880 
the average price of anthracite foundry pig-iron, in Phila- 
delphia, was $28.50 per ton of 2,240 pounds ; in 1883, $22.37, 
and it is now about $20. The prices of 1883 were eleven 
per cent, less than in 1880; the production was twenty per 
cent, greater. 

Pig-iron assumes great importance as a producing inter- 
est, and it is often claimed that depression in this branch of 
industry is always accompanied by depression in all others ; 
but this assumption is putting the cart before the horse. 
When depression in the iron industry is caused by any gen- 
eral check to the consumption of iron, it surely indicates 
wide-spread depression elsewhere ; but when depression in 



THE RAILWAY, THE FARMER, AND THE PUBLIC. 265 

particular iron districts is accompanied by such activity in 
others that the aggregate production increases, it merely 
indicates survival of the fittest — the substitution of new and 
well-placed furnaces for old and misplaced ones — lower cost 
of production, higher wages for more effective work ; in 
short, an adjustment to new conditions corresponding to 
the process which is affecting railroads. As a producing in- 
terest the iron industry is of very slight relative importance. 
The whole force of men and boys, who were employed 
in the census year in the production of about 4,000,000 
tons of iron, consisted of about 20,000 engaged in mining 
coal for the use of blast furnaces, 32,000 in mining iron ore, 
42,000 in blast furnaces, and perhaps enough more in sub- 
sidiary employments to make up 100,000 in all. In the 
present year, 1884, railroad construction may not exceed 
4,500 miles, against 11,591 in 1882, or a falling off of 7,000 
miles, which represents a reduction in the demands for rails 
only of about 700,000 tons, and of iron for other railroad 
use about 300,000, or 1,000,000 tons in all ; yet there is no 
falling off in the production of iron even approximating 
such figures, therefore the general consumption has vastly 
increased, while the railway consumption has decreased. 

The next consideration upon which future prosperity may 
be predicated, sooner or later, is the demand which our in- 
creasing population must make on existing instrumentalities 
of production and distribution. Agriculture is now pros- 
perous. The railway system is in process of adjustment to 
new and sounder conditions. Of manufactured goods there 
seems to be a moderate excess, but it is generally believed- 
that if this stock were distributed in the usual way on the 
shelves of the dealers, and had not been permitted or forced 
to accumulate on the hands of the producers, it would bear 
no appearance of excess. It is the waiting for events, the 



266 THE RAILWAY, THE FARMER, AND THE PUBLIC, 

question, " What next ? " that has for a little time checked 
the customary circulation of goods, and has caused what 
was named, when it was predicted a year and a half since, 
a temporary "commercial paralysis." This paralysis has 
been finally caused by what a president of one of the sound- 
est banks in New York has well named " a moral panic," to 
distinguish it from an ordinary commercial or financial 
panic. When will this paralysis end ? No one can tell, 
but we may measure the demand which our present increase 
of population at the rate of nearly or quite 2,000,000 persons 
a year must make upon the existing instrumentalities of 
production and distribution, and perhaps we may then, at 
least, venture to guess when the whole procession of the 
trades will move on. 

Let it be assumed that within a year, more or less, we 
shall have reached a state of equilibrium somewhat similar 
to that of 1880, when all existing railways were fairly well 
employed, all manufacturing establishments fairly well ad- 
justed to the then existing demand, and all farmers of in- 
telligence were prospering. Under such conditions, it of 
necessity ensues that for each child born one adult must 
seek a new place of shelter, and each immigrant family must 
be housed ; for each family of five, one new cotton-spindle 
must be set in motion ; a half a ton additional of iron must 
be made ; thirty or forty additional pounds of wool must be 
converted into cloth ; and all other branches of productive 
industry must be increased by the addition of new capital, 
/. r., new machinery, new tools, and new appliances. At 
the same time, the r'Uilway mileage must be increased in the 
ratio of not less than 6,000 miles a year to serve the cross- 
way traffic of the existing population and to open new fields 
for the increase. 

This is the kind of constructive enterprise, having refer- 



THE RAILWAY, THE FARMER, AND THE PUBLIC. 267 

ence to increasing and to future needs, which is subject to 
great variations and to vastly greater fluctuations than the 
mere subsistence of an existing population. The work of 
subsistence must go on, and must always give constant em- 
ployment to by far the greater part of the population. We 
are always within less than one year of starvation, and 
within two or three years of being naked. In supplying 
these daily wants, work must be constant ; but constructive 
enterprise may vary fifty per cent, at one period compared 
to another, and that lesser portion of the population which 
must be engaged in construction in any decade may be 
pressed to the utmost for six to seven years, and then be 
half out of work for three to four, during which period of 
cessation the enterprising ones betake themselves to new 
land. We may approximately measure this constructive 
force. We numbered 50,000,000 in 1880. The abnormal 
increase by immigration added to the natural increase gives 
us now 57,000,000, June 30, 1884. We are probably increas- 
ing now at the rate of 2,000,000 a year. Let it be assumed 
that a condition of equilibrium may be reached January i, or 
by July 1, 1885, that railways are then adjusted, manufacturers 
fairly employed, and agriculture prospering, what construc- 
tion will become necessary to establish the capital necessary 
for sheltering, clothing, furnishing with tools, and moving 
the products of 2,000,000 people? It will be observed that, 
whatever the measure of this demand may be, it will be 
wholly a new demand for labor. The bricks must be made, 
the timber must be cut, the ore must be mined and smelted, 
the people must be housed and furnished with machinery 
and tools, before they can even begin to sustain themselves 
and to produce for themselves the daily subsistence which 
they will require. 

All existing capital being balanced to the need of an ex-. 



268 THE RAILWAY, THE FARMER, AND THE PUBLIC. 

isting population, the first demand of additional population 
is for new capital to be saved and invested, all capital being 
a concrete form of labor saved for future use. We may, 
therefore, convert the capital required by 2,000,000 people 
by way of terms of money into men's labor ; that is to 
say, if any are now idle how soon will constructive enter- 
prise require all their work and a great deal more? 

First, Shelter. Can the average demand of each new 
family of five persons for shelter be fixed at any less than a 
house or part of a house, costing $500, to each family, or 
$100 per person ? The poorest New England factory tene- 
ment costs more than this, but in the South shelter costs 
less. If this is the lowest measure, the provision for the 
shelter of 2,000,000 people will cost $200,000,000. That is to 
say, this sum of money must be paid for the conversion of 
trees, clay, and ore into houses. The average earnings of 
all who are engaged in these branches of work are not less 
than $400 per year, at which rate this sum measures a de- 
mand for the work of 500,000 wood-cutters, brick-makers, 
metal-workers, artisans, and mechanics. If $500 per family 
of five persons is too much, the furnishing of the house may 
be included. 

Second, Railroads. The next great provision to be made 
is for the construction of new railroads. This year we may 
reduce to 4,000 miles, but soon the average must go up to at 
least 6,000 miles. If 6,000 miles a year on the average are 
needed, they will cost not less than $25,000 per mile in hard 
money for construction and equipment, or a total of $150,- 
000,000. The men who do this work are laborers, miners, 
metal-workers, and mechanics. A fair average of their 
earnings would be not less than $350 per year, but to be 
conservative we may use $400 as a divisor, and then this 
sum measures a demand for the work of 375,000 men. At 



THE RAILWAY, THE FARMER, AND THE PUBLIC. 269 

five to the mile, which is now a fair average, 30,000 men 
will also be required to operate the new railroads after 
completion. 

Third, Clothing mid Iron. In order to supply 2,000,000 
with cotton and woollen cloth, boots, shoes, and hats, and 
with 200 pounds iron per head, an expenditure in new fac- 
tories and iron-works of not less than $30,000,000 will be 
needed, and at $400 this measures a demand for the work 
of 75,000 men, while 30,000 men, women, and children will 
be needed to operate the works after they are constructed/ 

How can we measure the capital which will be needed in 
the 330 other branches of manufactures which have not been 
named, in order to begin to provide for the future subsist- 
ence of 2,000,000 people ? It cannot be done with accuracy, 
but already we have measured a demand for the work of 
1,000,000 of the existing population ; and of this work, the 
provision for shelter, clothing, and iron, requiring the work 
of 600,000 persons, is absolutely new work in addition to 
any and all work now done. How many capable and com- 
petent workmen or workwomen are there now out of em- 
ployment and seeking work anywhere ? What was the 
greatest number in the most depressed period after 1873? 
Is not all the common talk of over-production the veriest 
nonsense, when within one or two years from any given date 
all that there is produced must be used in making prepara- 
tion for increasing wants, while, on the other hand, skilled, 
competent, and sober laborers never lack employment? 
This country cannot stop. The greater the check to con- 
structive enterprise now, the greater the activity must be in 
one, two, or three years. Who shall say when it will begin? 
You may ask the apple-woman. Such are the facts of 

^ For the average earnings of the classes named, reference may be had to the 
census. 



270 THE RAILWAY, THE FARMER, AND THE PUBLIC. 

the past and present. Who dare forecast the immediate 
future ? 

How much will the progress of this country be hindered 
by distrust of politicians who are not statesmen, and by the 
futile attempts of ignorant legislators to regulate railway 
trafific and to control great industrial forces by means of 
meddlesome statutes inconsistent in their own provisions, 
and retarding rather than promoting the welfare of the 
people ? Who can measure the iniquity of the railway 
wreckers who have used their power for nefarious purposes 
— stolen franchises, cheated their stockholders, and per- 
verted the most powerful and beneficent instrumentality 
ever placed at the disposal of man to the basest purposes ; 
and who have made it possible to say that the present is 
" a moral panic," caused by the want of honor and integrity 
among those who had secured places of highest trust and 
responsibility? The riots of Cincinnati had their origin in 
the perversion of justice in the criminal courts. The injury 
which has been inflicted by the perversion of the civil 
courts of a neighboring State, at the instance of men who 
can now be named, may some time culminate in a remedy 
equally disastrous, but by which the wrong will be remedied. 
When courts and judges are corrupted, men fall back upon 
their natural rights, and remedy their wrongs by rougher 
methods than those which are contemplated by law. 

It would, of course, have been impossible for me to have 
given these facts had not the railway problem possessed a 
certain fascination which has lately led me to continue 
these tables, which attracted a good deal of attention about 
four years since, down to the present time. These tables 
are now placed at your disposal,' and I think they fully sus- 

' This treatise was first prepared as a continuation of the testimony given by 
the writer before the Senate Committee on Labor, to be included in their final 
report. 



THE RAILWAY, THE FARMER, AND THE PUBLIC. 2/1 

tain the position which I have taken, to wit : that railway- 
charges were reduced to the lowest possible terms about 
the year 1880, since which date they have sometimes been 
forced below the cost of the service; and that when the 
whole traffic of two great States like New York and Ohio is 
performed at a profit of a quarter of a cent a ton per mile, 
and sometimes for much less, the only effect of legislative 
interference would be fraught with danger, unless limited 
to securing publicity of accounts and a board of friendly 
arbitration, like the railway commission of Massachusetts, 
whose example in this matter has been followed in several 
other States. 

In conclusion, a few words may be added upon the gen- 
eral principles upon which progress in the past has been 
based, and upon which it may be predicated in the future. 
What effect have these and other changes had upon the 
mass of the population who labor for wages, and whose 
daily bread depends upon their daily work ? All profits, 
wages, and taxes are and must be derived from the con- 
version and sale of the annual product, /. e., from the pro- 
ducts of each succession of the four seasons. The money 
measure of this product — that is to say, its market value, is 
determined directly or indirectly by its competition wath 
other like products in the great markets of the world. The 
world subsists by the exchange of product for product, and 
the balances are settled in money in the centres of ex- 
change, whether national or international. The rates of 
wages are, therefore, a result corresponding with and meas- 
^uring the share which the workman receives from the sale 
or exchange of the product on which he has spent his work. 

In this country, the most effective machinery and the 
most versatile and intelligent labor are applied to the most 
ample natural resources possessed by any nation. A huge 



2/2 THE RAILWAY, THE FARMER, AND THE PUBLIC. 

abundance, therefore, ensues from the least amount of 
human labor. On some of the fattest land in the West the 
measure of the product of one man working the best ma- 
chinery with a pair of horses has reached one hundred tons 
of corn in a single season. The aim of some of the great 
"bonanza wheat farmers" of Dakota has been to apply 
machinery so effectively that the cultivation of one full 
section, or 640 acres, shall represent one year's work of only 
one man. This has not yet been reached, but so far as the 
production of the grain of wheat is concerned one man's 
work will now give 1,000 persons enough for a barrel of flour a 
year, which is the average ration. One man's work for one 
year suffices to supply 500 people with the largest quantity 
of iron consumed by any nation on the earth. The work of 
one operative in a wollen or cotton factory, or in the 
auxiliary print-works or bleachery, suffices to convert cotton 
and wool into textile fabrics for 250 or more of the most 
amply clothed people in the world. In proportion to the 
increase and efificiency of capital, a less number of laborers 
suffices for necessary work, wages increase in amount, and 
the purchasing power of each dollar of the earnings of the 
people is also augmented. 

The truth of the fundamental law of labor is historically 
sustained — to wit : that high rates of wages of the highest 
producing power are the necessary result or correlative of 
the low labor cost of production. The operative of to-day 
earns twice the wages in ten hours that the operative of forty 
years ago could earn in thirteen hours per day. By the 
combined force of more adequate capital working harmoni- 
ously with more intelligent labor, the standard of a good 
subsistence is raised, the cost is decreased, the hours of labor 
are shortened, and the struggle for life is rendered less and 
less severe. The time will surely come when, by the work- 



THE RAILWAY, THE FARMER, AND THE PUBLIC. 273 

ing of these great forces of industry, intelligence, and integ- 
rity, even the vision of the mistaken enthusiast, who seeks 
to shorten the hours of work by meddlesome statutes, will 
be realized, and when eight hours of average work per day 
may suffice to produce an ample subsistence. In the mean- 
time, the demagogue and the quack will mislead honest but 
mistaken men, and will endeavor to secure position and 
power by cheating them with paper money, crippling the 
railway service by means of so-called "anti-monopoly" 
statutes, and by restricting the freedom of contract by 
meddlesome statutes affecting the hours of labor of adult 
men and women, which retard more than they promote the 
object for which they are enacted. 

It will be observed that the increase of population in this 
country is subject to a moderate variation from a uniform 
rate, as the immigration maybe large or small; and that, 
conversely, immigration is retarded or stimulated by the 
conditions of industry and of constructive work. On the 
other hand, while the aggregate increase in railway mileage 
has been vastly greater than the increase in population since 
1865, it has also been subject to very much greater fluctua- 
tions. On the 1st of January, 1865, the population probably 
numbered 34,000,000. On the ist of January, 1885, it will 
probably number 58,000,000. The railway mileage on the 
1st of January, 1865, was 33,908. Estimating the probable 
construction of the present year, 1884, at not over 4,000 
miles (possibly 5,000), the number of miles January i, 1885, 
will be a little over 125,000. 

The following diagrams will show the great fluctuations, 
or waves, as they may be called, in the construction of rail- 
roads and in the consequent employment of labor. 

Now the construction of a railroad represents in greater 
measure than almost any other form of capital a given and 



274 THE RAILWAY, THE FARMER, AND THE PUBLIC. 



§1 

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THE RAILWAY, THE FARMER, AND THE PUBLIC. 275 

measurable amount of direct human or manual labor, 
coupled with but a moderate application of labor-saving 
machinery or capital. It represents more than almost any 
thing else a conversion of human labor, but little assisted 
by capital in labor-saving machinery, into one of the most 
effective forms of fixed capital. It is the work of the digger 
and the delver, of the navvy, the track-layer, and the wood- 
man who cuts the ties, as well as of the iron- and coal-miner, 
the smelter, and the operative in the rolling mill, supple- 
mented by the work of a relatively small number of 
mechanics in building stations and equipment. We can 
only reduce the construction of a railway to terms of so 
many men's labor for a given period in a very broad and 
general way, but even in this manner we may make an ap- 
proximate estimate of the force employed one year on each 
mile. If we assume that, without paying any regard to the 
nominal amount of security issued, each average mile of 
railway construction has cost $25,000 in gold, this sum 
represents, or might be converted into, 50 men for one year 
at $500 each, or of 62.6 men at $460 each. A fairly approxi- 
mate measure of the number employed would be midway, 
or 56 men. If the average pay is less, the number of men 
will be greater per mile per year. At this high ratio of 
wages, the force employed in the construction of railways 
has varied in the proportions set against the mileage table 
in the preceding diagrams. I use intentionally, in this case, 
a high average rate of earnings and probably a low money 
cost per mile, in order not to exaggerate the number of men 
employed. 

Nothing is claimed for this computation except that it 
gives an approximate indication of the fluctuation in the 
demand for common labor which ensues from the activity or 
the increase in railway construction. It may be admitted 



2/6 THE RAILWAY, THE FARMER, AND THE PUBLIC. 

that some labor-saving contrivances have been introduced 
in this branch of work since 1865,. and that the construction 
of 1883-4 would represent a less proportionate number of 
men per mile at higher wages than in 1865, when the 
up\Aard wave began to move, or in 1871, when the first 
wave began to recede; yet after making all due allowance 
for this variable term, railway construction remains in great 
measure an example of arduous manual labor in grading the 
way, piercing the tunnels, levelling the hills, cutting the ties, 
and in mining the ores and coal for the making of the rails. 
It is almost wholly direct human labor. The variation in 
this demand for labor cannot have been less than from 
about 60,000 men in 1865, up to 400,000 in 1871, down to 
90,000 in 1875, up to 650,000 in 1883, and back to not over 
280,000 in 1884, even if we exceed the estimate in the table 
of 4,000 miles and actually reach 5,000 miles in 1884. If we 
build only 4,000 then the demand will fall to 224,000. In 
this example we have an extreme case of the dependence of 
the common laborer upon the continuation of constructive 
enterprise ; using the term constructive as a designation of 
that part of the work of the country which is quite distinct 
and separate from the necessary work of providing or 
moving subsistence for a given or fixed population at a 
given time. The subsistence of a fixed population, and the 
maintenance of existing capital or instrumentality of pro- 
duction for a fixed number of persons, constitute necessary 
work, which cannot vary or fluctuate in any great measure, 
whether "the times," so called, are *' easy " or "hard." 
The great fluctuation in the demand for labor occurs in the 
demand for that small part of any given population which 
is or should be customarily employed in those constructive 
enterprises which are undertaken either for the purpose of 
meeting the increasing demands or " progressive desires "" 



THE RAILWAY, THE FARMER, AND THE PUBLIC. 2 J J 

of an existing population, or in preparing to meet the abso- 
lutely necessary wants of an increase of the population. 

Under the ordinary or normal demand of a time of long- 
continued peace, it may be safely assumed that at least 
ninety per cent, of all the people of this country, who are 
engaged in production or distribution at any given time, 
are in fact employed in providing or distributing the neces- 
sary means of subsistence, or in repairing or maintaining 
existing capital, or in keeping up the condition of farms to 
the standard of that time; and that not exceeding ten 
per cent, are or can be employed in adding to the capital 
or wealth of the country, or in making preparation for 
housing and furnishing the next year's increase of people 
and getting them ready to become themselves self-sustain- 
ing. According to the census of 1880, the total number of 
persons who were occupied in the production or distribution 
of the annual product, as well as in the constructive enter- 
prises, was 17,392,099. 

In agriculture . . . . . . . . 7,670,493 

In professional or personal sei-vice ...» 4,074,238 

In trade and transportation ..... 1,810,256 

In manufacturing, mechanical, and mining industry . 3,837,112 



14,744,942 males, 2,647,157 females. 



17,392,099 



If the proportions which I have adopted are approxi- 
mately correct — to wit : ninety per cent, engaged in pro- 
viding necessary subsistence and maintaining existing capi- 
tal ; ten per cent, engaged in constructive enterprise to 
meet increasing wants and an increase of population, then 
the proportion of the whole number in each department of 
industry would be : 

Class I — Necessary subsistence ..... 15,652,899 
Class 2 — Constructive work . . , , . 1,739,200 



2/8 THE RAILWAY, THE FARMER, AND THE PUBLIC. 

But it will be observed that hard times increase thd 
number engaged in agriculture by giving some kind of 
occupation to those who are thrown out of other employ- 
ment ; we must, therefore, treat only the other occupations, 
numbering 9,721,606; or we may assume at a year's later 
date, when the "boom" of 1880 ended and the present 
depression began, the number was 10,000,000 persons occu- 
pied otherwise than in agriculture. Of this number we 
may also assume that the work of 9,000,000 could not cease 
and has not ceased even in the worst period of 1883 and 
1884, because their work is necessary to mere existence; 
but the work of 1,000,000 engaged in constructive enter- 
prises, depended wholly upon tJie confidence of the owners or 
capitalists in the future progress of this country. It is this 
point which I wish to bring into the clearest light. There 
has been and can be no lack of capital. In 1873 and 1883 
the silly cry of over-production has been heard in the land. 
Over-production is but another name for an excess of capi- 
tal. The times are " hard " or " easy," and prosperity or 
adversity depends on the single question whether construc- 
tive enterprise, or the preparation for future wants, is giving 
employment to the excess of capital and to one million 
persons, or to only half a million ; half a million consti- 
tute only one percent, of the population of 1880. It is the 
Micawber example on a grand scale — a shilling over is 
wealth, a shilling under is poverty. One per cent, of the 
population out of work (500,000) is adversity ; one per cent, 
more workmen needed but not readily found is prosperity. 
Activity in the circulation of capital and labor rather than 
mere accumulation, indicates welfare ; lack of confidence, 
slow movement, hard times, mean want because a fraction 
are unemployed, but that fraction is an army 500,000 strong. 

I have already proved that there were about 300,000 less 



THE RAILWAY, THE FARMER, AND THE PUBLIC. 279 

laborers employed in the construction of railroads in iS/f 
than in 1871, and that there are probably over 400,000 less 
in that work in 1884 than there were in 1882. 

In a previous part of this treatise I have shown the small- 
er relation which the capital in all manufactures bore to 
the capital in all railroads in 1880. We may assume that 
the cessation of constructive enterprise — that is, in the 
building of new factories, mills, and works of all kinds — was 
checked after the panic of 1873, and we know that it is 
checked now in 1884, but perhaps not in as great a measure 
as the construction of railways has been checked. In this 
cessation of factory building we may perhaps account for 
the lack of employment of a less number than those who 
have been discharged from railway construction, but prob- 
ably enough to carry that number which I computed at 
400,000 up to 560,000 in all, corresponding substantially to 
one half the total number of our present population which 
I have assigned to constructive work under normal con- 
ditions. Upon this very apparent condition of adversity 
we may predicate a speedy return of activity and prosperity. 
Where can one find 560,000 men and women out of employ- 
ment at the present moment ? They are not to be found, nor 
any number approaching such a maximum. Neither could 
any such number have been found in the darkest period of 
depression after the panic of 1873. The thing which really 
happens after one of these checks to the construction of rail- 
ways, factories, works, or furnaces, is that those who are dis- 
charged from this class of work betake themselves to new 
land, open new farms, build up new towns in far-away places, 
and presently add to the demand for new railways and be- 
come consumers of metals and fabrics for which, again, more 
new works and new mills must be provided, even in addition 
to those required for the increase of population. Witness 
Western land sales in hard times. 



28o THE RAILWAY, THE PARMER, AI^D THE PUBLIC. 

It thus happens that the more severe the shock to con- 
structive enterprise and the greater the depression at one 
period, the greater must be the activity and progress a little 
later. Thus it has been in the past, thus it will be in the 
immediate future. The one point which cannot be deter- 
mined is the exact date when this change will come. This is 
a mental and not a material question — a question of confi- 
dence and not of capital. It is in the interval of adjustment 
to changed conditions that trade is dull and that " times 
are hard." The imagination is one of the most potent 
factors in rendering adverse conditions more intense, and in 
pushing favorable conditions to a dangerous extreme. 

I have endeavored to show how important a factor the 
railroad is in all the work of modern life in this land. 
There is one more comparison yet to be made. The figures 
in the admirable census volume on transportation practi- 
cally concur with those of Poor's Manual, each sustaining 
the substantial accuracy of the other. According to the 
census the number of miles of railroad in operation June 30, 
1880, was 87,801, and the number of men employed in their 
operation and maintenance was 418,957, a fraction less than 
five men per mile. I have computed the number engaged 
in the construction of railroads in 1880 at over 400,000 men, 
which is apparently correct. If this estimate be accepted, 
more than 800,000 men were engaged in the railway service in 
the census year, and in the year 1882 the number must have 
been over 1,000,000. The total number of males engaged in 
all occupations listed in the census was 14,744,942. It there- 
fore follows that one man out of every \Z\ men occupied in 
any kind of work in this country, either mental or manual, 
was employed in 1880 in connection with railroads, and 
since then the proportion has been greater. Not less than 
600,000 are now employed in the operation of railroads. 



THE RAILWAY, THE PARMER, AND THE PUBLIC. 28 1 

For many years more than one man in every ten men em- 
ployed in any kind of gainful occupation, aside from agri- 
culture, has been engaged either in constructing or operating 
railways. The importance of this fact can only be compre- 
hended by comparing this great peaceful force, which is 
continually engaged in making the struggle for life easier, 
with the occupation of as great a number in other countries. 
Our army is but a border police force, opening the way 
for yet more abundant production. As the railway has di- 
minished the cost of moving our great crops, our market 
has extended ; every dollar thus added in money or in 
money's worth has been so much added to the annual pro- 
duct from which all profits, all wages, and all taxes are alike 
derived. 

On the other hand, with every year the nations upon the 
continent of Europe have been more and more oppressed 
by increasing armies, heavier taxes, and increasing debts ; 
each short interval of peace barely suffices to enable great 
armies to be recruited, but neither during peace nor war can 
debt or taxes be reduced. 

The sum of our taxes — national. State and municipal — is 
eight per cent, upon the largest estimate of our national 
product ; but from the worst tax of all, the blood tax of a 
standing army, we are saved. We spend our force in build- 
ing railroads instead of wasting it in passive war. In the 
principal states on the continent of Europe one man in 
every twenty-two is a soldier in active service in a standing 
army, and perhaps one more in every twenty-two is en- 
gaged in sustaining that soldier. The relative burden of the 
standing army is pictured by these two lines : 

United States, i in 400 •■-" in 1880, and now a less proportion. 

These lines may well be pondered by those who treat the 



282 THE RAILWAY, THE FARMER, AND THE PUBLIC. 

rate of wages. It is the sum of wages by comparison of 
which the cost of production may be measured in money 
and not by the rate. When the obstructions of time and 
distance are removed, as they are almost wholly by railroads, 
\.\i&rate of wages will be highest in money where the cost is 
lowest in labor; because at that place the greatest skill, the 
best machinery, and the most productive natural conditions 
will be made use of, whereby the largest production will be 
assured at the least cost of human labor ; when this pro- 
duct comes into competition with other products of like 
kind, the price will be the same provided the quality is 
equal, or higher if it is better. Witness the competition in 
London of the wheat of Dakota with the wheat of Russia 
and India. The measure of the cost is not the high rate of 
the wages of the few skilful men who work the machinery of 
production in Dakota, nor is it the low rate of wages of the 
peasants of Russia or of India. Wages are but the labor- 
ers' share of the value of the joint product of capital and 
labor, converted into terms of money by the sale of such 
product ; the competition of capital with capital tends to a 
constant increase of product, coupled with a decrease in the 
rate of profit, while conversely the share of the laborer tends 
constantly to an increase both absolutely and relatively. 
Hence the more the capitalist applies his capital and in- 
creases his wealth the more the laborers' wages rise in rate 
and in purchasing power alike. The measure of the division 
of the laborers' constantly increasing share among them- 
selves — the personal rate of each man's wages — rests wholly 
on the individual skill and industry of each member of the 
great industrial army. The man or woman who applies ma- 
chinery most effectually, and who compasses the largest 
product with the least expenditure of time or labor, earns 
the highest wages, — in other words, obtains proportionately 



THE RAILWAY, THE FARMER, AND THE PUBLIC. 283 

a larger share of the proceeds of the work than the one who 
is incapable or who is subjected to more adverse conditions. 

Now what is the connection of these lines picturing stand- 
ing armies with either the sum or the rate of wages ? Each 
year's product is exchanged or sold and thus converted into 
terms of money ; a small portion of the last season's crop, 
or money, is brought over to set this year's crop in motion, 
and a small portion of this year's product or avails in money 
is carried forward to the next ; subject to these conditions 
each year's work must meet each year's wants, and the 
world is always within one year of starvation, the most pros- 
perous nation within two years. Each year's product is 
converted into terms of money by sale or exchange, and 
from this sum must be derived all profits — all wages and 
all taxes. The sum of the product will depend upon the 
measure of labor which is applied to natural resources ; if 
one man in twenty is withdrawn from productive work, by 
so much is the product decreased ; if one other man's 
product is needed to sustain the idle soldier, by so much 
are the taxes increased. Wages are cut down in both ways, 
by reduction of the product and by the waste of what is 
produced in productive taxation or preparation for war. 
When the writer first compiled the article upon the Rail- 
road and the Farmer, of which this treatise is a continuation, 
he submitted the following table. 

Since that date (1881), with the possible exception of 
Italy and Holland, all nations upon the continent of Europe 
have either been subjected to a heavy increase of taxation, 
or else to an annual deficit and an increase of debt. It ap- 
pears to be as impossible to sustain the present burdens of 
passive war as it is to disband the armies without revolution ; 
yet migration is obstructed in order that the ranks may be 
kept full. - ■ ■ 



284 ^-^-^ RAILWAY, THE FARMER, AND THE PUBLIC. 

THE BURDENS UPON EUROPE AND AMERICA COMPARED (OMITTING RUSSIA, TUR- 
KEY, AND ALASKA.) 
Relative Areas. 

Europe , omitting Russia 
and Turkey, 1,546,802 sq. 

miles .... ^^^^^^^^mmmm^^^^^^^^imm 

United States, omitting 
Alaska, 3,034,399 square 
mile .... ^i"M-^^™^"— ^"^i^^^^^^^— ^^^^^^■— ^^^^^^^"^M" 



Relative Population to One Square Mile. 

Europe, 145 per sq. mile. ^^^^^,^^^aaB^.^^_HB^^^^^^^ 
U.S., 16J " ^_ 

Relative Burden of Debts to Each Inhabitant. 

Since 1848 the debt of Eu- 
rope has nearly trebled and 
is still increasing. In 1880 
it was $16,794,800 000, or an , 
average to each inhabitant 
of $74.64. Since i83o it has 
increased, .... ^_^^^^.,^^^^^^^^^_^^^^^^^^^^^ 

In 1848 the United Slates 
owed no debt of any mo- 
ment. On the ist August, 

1866, our war debt was at • 

its ma.ximum, and was es- 
timated (liquidated and un- 
liquidated) by Secretary 
McCulIoch at $2,997,386,203 
— an average to each in- 
habitant at that date of 

$83.35 .... ^^^_^^^.^__^_^_____^___ 
March i, 1881, the debt had 

been more than one third 

paid, and was reduced to 

$1,879,956,412— an average 

to each person of $36.85 ■ mm^^^^^^^a^m^^^ 
At this date the debt has 

been reduced to $1,450,- 

000,000 — an average to each 

person of $25 . . . ^b:„_^„^^^_ 

What do these lines mean to him who can read what is 
written between them ? Is there not, on the one side, pas- 
sive war alternating with active war, heavy cost of produc- 
tion, high taxes, low wages, misery and wrong, culminating 
in socialism, communism, nihilism, revolution, and repudia- 



THE RAILWAY, THE FARMER, AND THE PUBLIC. 28$ 

tion ; on the other, peace, order, and abundance, low cost 
of production, high wages, ample profits, stability, and 
welfare? Bti^ this is on one co7idition — that our intelligence 
is equal to our opportunity, and that the demagogue and the 
ignorant sentimentalist do not combine to tamper with the 
standard of value and debase our coinage ; that the great 
forces of capital and labor are not prevented from working 
in harmony by meddlesome statutes ; and that all taxes 
which the people pay are received by the Government and 
are honestly expended in the public service, by ofificials 
chosen and maintained in office on the condition only that 
their ability and character entitle them to serve in public 
ofifices. Let us now return to our main subject, the influ- 
ence of the railroad. 

No more facts or figures are needed to prove how pro- 
foundly a" moral panic " in railways must affect all interests 
in this country, and how much will be gained in human 
welfare if the railway service is now brought to the same 
standard of commercial integrity as that which controls all 
other enterprises in this and other civilized countries. 

In the construction and operation of railroads the greatest 
ability, industry and, integrity have been and will be exer- 
cised ; but it has been truly said, " the integrity of the 
many makes the opportunity for the fraud of the few." In 
railway enterprises the opportunity is greater in proportion 
to the complexity of the work and the magnitude of the 
sums employed, therefore have the villany, the fraud, and the 
breach of trust been almost measureless. Among even 
those who are now engaged in this work, every one who is 
in any way conversant with affairs can designate men whose 
names are synonyms for all that is able, honorable, and 
true. But alas ! other names may also be given which are 
synonyms for all that is criminal, base, dishonorable, and 



286 THE RAILWAY, THE FARMER, AND THE PUBLIC. 

fraudulent — names of men with whom no other man can 
serve without being himself defiled. The " moral panic " 
will end only when such men are not only dishonored but 
discredited. At that date confidence will be restored and 
constructive railroad enterprise will once more begin. 

In another part of this treatise I have given an analysis 
of a loaf of bread, and also some facts in regard to the 
quantity of human labor represented by the wheat of 
which the flour is made. I proved that one man's work for 
one year, on a great Dakota farm, corresponded to the 
wheat required to produce i,cx)0 barrels of flour, and to de- 
liver it at the railroad with an ample supply retained for 
seed. Let us follow this matter to the end : 4,500 bushels 
of wheat hauled from far Dakota to Minneapolis, there con- 
verted into 1,000 barrels of flour, and thence hauled to 
New York, is equal to an average haul of 120 tons about 
1,700 miles. Upon the New York Central & Hudson River 
Railroad, the average number of tons hauled per year, per 
man employed in the freight service, is almost exactly 
equivalent to the work of one man for one year in hauling 
120 tons 1,700 miles. I have not the exact data of the 
labor, in days' or years' work, in milling and preparing barrels, 
but as nearly as I can compute it this again is in the ratio 
of one year's work of one man to each thousand barrels. 
Add to the work of these three all the labor required to 
keep the machinery of the farm, of the flour mill, and of the 
railroad in repair, and the work of delivering the flour to the 
baker in New York, and even then we have not exceeded 
four years' work of four men to each thousand barrels of 
flour ready at the oven for conversion into bread. I have 
given the name of Samuel Howe, who sells good bread at a 
fair profit, and yet at a price of three cents and a fraction 
per pound, and from him I learn that only three persons 



THE RAILWAY, THE FARMER, AND THE PUBLIC. 2^^ 

are needed in his bakery and in his shops to convert into 
bread i,ooo barrels of flour and sell the same. 

This, then, is the modern miracle : that by means of 
capital in farms, flour mills, railways, and bakeries, seven 
men, earning for themselves a good subsistence, serve one 
thousand persons with all the bread they need in a year, 
and, in the whole progress, from the planting of the seed 
until the bread is taken from the oven to be moved to the 
shop for sale, not one human hand will have touched the 
wheat, either in the grain or in the flour — only the bread 
itself will be handled. Yet not only the railway corpora- 
tion, but the great farmers of the far West and the owners 
of the wheat elevators and of the flour mills, and, I dare 
say, the great baker of New York, have been the special 
mark for the obloquy, abuse, and interference of the dema- 
gogue, the anti-monopolist, and the ignorant and meddle- 
some legislator ; while capital is charged with oppressing 
labor and grinding the faces of the poor. It was said of old 
time that "the fool shall be brayed in a mortar." Perhaps 
the true punishment of those who excite passion and preju- 
dice against these great forces of capital, by which bread 
has been made abundant and cheap, would be to deprive 
them of their benefit, and to force them to bray their own 
wheat in a mortar in order to gain their bread. 

When the time of the National Legislature is taken up 
by the discussion of yet more obnoxious measures of 
national interference and futile attempts to control this 
great work, legislators may well remember that by means 
of the publicity of accounts which has been secured by the 
railroad commissioners of several States, and the yet greater 
national publicity of accounts secured by the private publi- 
cation of Poor's Railway Manual, the service of the railways 
has been analyzed and defended, if this presentation of facts 



283 THE RAILWAY, THE FARMER, AND THE PUBLIC, 

constitutes a defence and a justification of their great work. 
A commission which may bring public opinion to bear upon 
railway corporations may well be established, and there the 
work of the legislator may well cease. 

There is another popular prejudice in refutation of which 
a few words may be said, to wit : the prejudice against the 
grants of great areas of public land to railway corporations. 
That this system has been abused may not be denied ; that 
it has led to many premature schemes and to bad methods 
of construction by speculative construction companies is ad- 
mitted ; but this does not touch the merit of the system 
itself. That merit is this : by granting only each alternate 
section of 640 acres for a certain distance on each side of 
the line of construction, the subdivision of land in moderate 
parcels has been assured, and a monopoly of land has been 
prevented in a more effective manner than could have been 
compassed in any other way. It may be that some land 
grants ought to be forfeited for cause, and it may be that 
this grand ruling idea of the system has been sometimes 
evaded. Upon these mere incidents the present writer has 
nothing to say. He would only call attention to the fact 
that the system has worked well in causing a wide distribu- 
tion of our population, and that it has assured a homestead 
to a vast number of persons who never could have attained 
one by any other method ; because without the railroad, the 
construction of which has been induced by the land grant, 
the settlement of the land itself could not have been made. 
On the other hand the Government itself has gained the 
benefit of innumerable sales of the alternate sections at 
double the prices of its other unoccupied territory. It 
had been my intention to append a table to this treatise, 
giving the important facts in respect to the sales of railway 
and Government land on the lines of Land Grant roads, but 



THE RAILWAY, THE FARMER, AND THE PUBLIC. 289 

I found it impossible to find the data required. The sub- 
ject might well be investigated officially by the Department 
of the Interior. 

I have ventured in this treatise to give the reasons why 
we may expect a speedy return of constructive enterprise, 
of active employment, and of the quick circulation and 
rapid consumption of commodities, in which prosperity con- 
sists. It is doubtless true that " there is a tide in the affairs 
of men, which, taken at the flood, leads on to fortune," but 
it is also true that he who attempts to forecast the exact 
time when the ebb shall cease and the flood shall come, and 
who makes an error even of a single month, may lead to the 
loss of the fortune already gained, because no man can tell 
when a " moral panic " will end, or when confidence will be 
restored on which the whole depends. 



J 



APPENDIX I. 



In this connection the following analyses of the items which go 
to make up the price of bread in Boston may not be without in- 
terest. It will be observed that I have made use of the elements 
of cost in a small bakery, where the proportion of labor, fuel, etc., 
is much greater than in a large and thoroughly equipped establish- 
ment. I have also given the prices which are charged for a poor 
quality of bread in small shops in the poorest districts of the city. 
The destruction of the very poor is their poverty and their con- 
sequent inability to buy their food and fuel on good terms. What 
we greatly need in Boston is the counterpart of the " Howe Na- 
tional Bakery " of New York. At their great shops, which have 
been placed in three or four of the most densely populated dis- 
tricts of New York, a loaf of the best quality of bread, weighing 
two pounds before it is baked, and about if- pounds afterward, is 
sold over the counter for cash at six cents per loaf, and at this 
price the owner of the bakeries is satisfied with his profit. In his 
works the cost of labor and fuel is less than half the sum pictured 
in the diagram which gives the cost of bread to the poor of Boston. 
Again, in this we find an example of adequate capital — high wages 
to the operative in the bakery, low cost of production of baked 
bread, and cheap food to the poor under the law of unrestricted 
competition, and under the rule of service for service, by means 
of which society itself exists, and under which labor and capital 
work as allies, not enemies. 

The following analysis was submitted by the writer to the Com- 
mittee on Education and Labor of the United States Senate : 

Analysis of Cost of a Loaf of Bread. — I am prepared to ad- 
mit that the railway has been a most important factor in distribu- 

2gt 



292 THE RAILWAY, THE FARMER, AND THE PUBLIC. 

ting food among the people of this and other lands, for without it 
thousands might starve, but I shall also prove to you, in the 
analysis of the loaf of bread, that it has become relatively the 
factor of least importance, at its present cost, of all the items which 
constitute the cost of bread to the consumer ; therefore, before 
you undertake to regulate the railways and thereby to reduce the 
price of bread, meat, and fuel, you must give your attention to 
vastly greater elements in their cost, which may be more readily 
made subject of statute law than the railway service can be, if 
either kind of work is to be taken in charge by the State. 

I shall take as my unit 450 bushels of wheat to be converted 
into 100 barrels of flour and then into bread, and I shall present to 
you all the elements of the cost of this bread, both in figures and 
by graphical illustration, as follows : 

What makes the price of bread in Boston ? Four hundred and 
fifty bushels of wheat are required to make 100 barrels of flour. In 
the left-hand column it is assumed that this wheat has been 
raised near Chariton, Iowa, and milled in Chicago. In the right- 
hand column it is assumed that the wheat has been raised near 
Glyndon, in Dakota, and milled in Minneapolis. 

It will be observed that if the railways earn as profit 30 per cent, 
of their charge, their profit on each barrel of Iowa flour moved 
about 1,500 miles is only 35:^ cents, and on each barrel of Dakota 
flour moved nearly 2,000 miles, only ^()\ cents. In point of fact 
the actual profit on grain and flour carried long distances is much 
less than 30 per cent, of the charge, and the actual profits for the 
above distances does not probably exceed 25 cents per barrel and 
50 cents per barrel, respectively. 

The railway charges are now so small that it does not leave you 
much of a margin to work upon and to save, but you cannot fail 
to notice that the charges made by the bakers and grocers is very 
large, and gives you an ample margin for legislative action. If 
you reply that all attempts to regulate the price of bread have 
failed, may I be permitted to rejoin that all attempts to regulate 
the charge of the railways have also failed, except, perhaps, in 



Chariton, Iowa. 



No. 



No. 8. $1,057 50 



No. 9. §1,620 00 



No, 10. $1,700 00 



No. 2. $117 50 

No. 3. $50 00 

No. 4. f?45 00 

No. 5. S^2° °o 

No. 6. $200 00 I 



No. 7, $210 00 



^,300000 



$562 50 ' 



October, 1883. 



No. I, $405, IS the price which the 
farmer receives in Iowa, at go cents 
per bushel ; S360, in Dakota, at 80 cents 
per bushel. 



No. 2, $117.50 is the charge made 
by the railway for moving 450 bushels 
of wheat from Chariton to Chicago, and 
100 barrels of flour thence to Boston, 
$197 50 ; Glyndon to Minneapolis and 
thence 10 Boston, $82.25 ; cost of rail- 
road service at 70 per cent., $138.25 of 
the total charges. 

$35.25 profit, at 30 per cent., $59,25. 

No. 3, $50, cost of milling. 
No. 4, $43, cost of barrels. 
No. s, S30, merchant's commissions 
and cartage in Boston. 



No. 6, $200, cost of labor in making 
100 barrels flour into bread in a small 
bakery. 



No. 7, $210, cost of fuel, yeast, salt, 
etc., used in converting 100 barrels flour 
into bread. 



No. 8, final cost of bread ready for 
distribution, average 3^ cents per 
pound ; varying a little with the quality 
of the iiour and the quality of bread. 
Iowa flour yields 270 and 290 pounds per 
barrel ; Dakota flour yields 280 and 300 
pounds per barrel. 



No. 9, the price which the poorer peo- 
ple of Boston pay for poor bread, made 
from a medium grade known as " baker's 
flour," averages not less than 6 cents 
per pound, which makes the cost of 
distributing 100 barrels of Iowa flour 
baked into bread. No. 9, $562,50, and 
100 barrels Dakota flour, $587.50 at the 
minimum yield of 270 and 280 pounds 
bread to the barrel. When either kind 
of flour is treated so as to yield 300 
pounds bread to a barrel and sold 
at 6 cents per pound, $80, or $120, is 
added, and the final cost of the bread 
to the consumer is at the rate of $18 
per barrel of flour, No. 10. 



Glyndon. 




$1,092 50 No. 8. 



, $587 50 



^1,680 00 No. 9. 

$120 00 
Ji.Soo 00 No. 10, 



293 



294 THE RAILWAY, THE FARMER, AND THE PUBLIC. 

Belgium, where the Government has once at least been obliged 
to prohibit the private corporations which own a part of the rail- 
roads from lowering their charges, lest the Government railroads 
should be unable to compete with them. 

Logical Consequence of the Demand for Governmental Regulation 
of Railroads. — Your committee has been asked, by what are known 
as the advocates of " anti-monopoly," to frame and present to 
Congress such laws as will forbid capital taking the advantage of 
labor by means of excessive charges for railway service, which 
charges are said " to make the rich richer and the poor poorer," 
and " to make bread dear." 

The distribution of bread by bakers' wagons and through gro- 
cers' shops is, as I have said, simple but costly ; the distribution 
of wheat and flour by railway is complex and difficult, but it is 
now done at so little cost as to leave little margin to be saved. 

If your committee will first regulate the distribution of bread 
and reduce its price by statute, and, second, reduce the cost of 
barrels or require the substitution of cheaper sacks, you may then 
be fully prepared to frame suitable statutes for the regulation of 
the railway service. I recall this subject because the advantage 
of this method is that you can begin in Washington, and, by re- 
ducing the cost of living there, you can make the salaries of Sena- 
tors and Representatives in Congress more adequate. When you 
have fixed the price of bread by legislation, you will, of course, 
take up meat, timber, and fuel, and after you have established an 
economic millennium in Washington, the several States, cities, and 
towns can supplement your national statutes by adequate munici- 
pal ordinances, in order to complete the system. 

Effect of Railroad Charges on Cost of Meat. — I have not been 
able to make a complete analysis of the price of beef in Boston, 
but this much can be submitted. Texas steers, worth 4 cents per 
pound live weight at Emporia, Kans., can be and are brought to 
Boston at a charge of i cent per pound. What it costs to fatten 
and kill them I know not, but this I do know, that if the price of 
my sirloin is high the railway charge has little to do with its cost 



THE RAILWAY, THE FARMER, AND THE PUBLIC. 295 

to me. Salt meat is brought at as low a charge as grain — hence 
railway charges have little to do with the high price of meat in the 
Eastern States. 

It therefore follows that the monopolists, if any such there are, 
who are grinding the faces of the poor and rendering bread dear, 
are not the Vanderbilts, the Tom Scotts, or the Garretts, but they 
are the nameless bakers, grocers, and others, who have added this 
enormous charge to the cost of bread and meat. The whole rail- 
way service, from the field to the baker's oven, costs but half a 
cent per pound, but the service of the baker, and the grocer, and 
the shopman, costs 2^ to 4 cents per pound of bread. If you 
will analyze your pound of beefsteak, or, if you are a Yankee, 
analyze the salt pork with which your beans were baked for your 
Sunday breakfast, I think you will find the greatest monopolists, 
if any there are, are running the butcher wagons and the provision 
shops of your cities. After you have succeeded in abating these 
enormous charges ; after you have regulated the simple traffic of 
the baker, the grocer, the butcher, and the provision dealer ; after 
you have prevented them from " grinding the faces of the poor," 
then take up the railway question, if you please, and see what is 
left for you to do. In dealing with this simple matter of the 
shopman and of the service of distribution by cart and wagon, 
you may learn how to regulate by statute the complex operations 
of the great railways of the United States, which have taxed the 
biggest brains and the ablest men of the land these twenty year? 
or more. These men have laid the foundation upon which you 
can work. 



APPENDIX II. 



Upon one of the great farms of Dakota, 

I man in i day plows 4 acres at 20 bushels per acre 80 bushels. 

seeds 15 " " " " " 300 

harrows 15 " " " " " 300 

cuts 15 " " " " " 300 

shocks 10 " " " " " 200 

thrashes and draws to elevator, 40 

300 bushels at the railway therefore stands for the work of 3^ men plowing I day. 

" I man seeding " 
" I " harr'w'g " 
" I " cutting " 
" i^^ men shocking " 
" 7I " thrashing and 

drawing. 

(Say 16 men.) I5|- men i day, 300 bu. 

Or, iSf bushels per man, at 20 bushels to an acre. Multiply by 
300 working days in a year, and the equivalent is 5,625 bushels 
for one year's work of one man. Leave 1,125 bushels for seed 
and home consumption, and we have 4,500 bushels, from which 
1,000 barrels of flour will be made. A year's annual ration of 
wheat flour to each person is one barrel a year, which will make 
275 pounds of baked bread. 

Let us assume 70 cents per bushel as the price of wheat at the 

railroad in Dakota, and produce 1,000 barrels flour into bread in 

New York. The various charges are as follows : 

4,500 bushels wheat at 70 cents ........ $3,150 

Moving to Minneapolis as wheat, and from there to New York as flour, 

at present rates (August, 1884) ....... 1,440 

Milling 500 

Barrels 450 

Conversion into bread — labor and material ..... 1,75° 

Selling the bread over the counter ....... 500 

$7,790 
296, 



THE RAILWAY, THE FARMER, AND THE PUBLIC. 29/ 

There may be a charge for a merchant's commission and for cartage if 
the flour is not bought by the baker from the miller, or is not deliv- 
ered from the cars at the bakery . . . . . , . $2io 



275,000 pounds of bread, 2^^^ cents per pound . . . . . $8,000 

It will have been observed that the raising of the wheat repre- 
sented the labor of i man for i year. The moving of the wheat 
and flour over 1,700 miles represents the direct labor upon the 
railway of i^ men working i year. The direct labor in milling 
and in making barrels from the log represents the labor of i man 
working i year. Add to the 3^ thus far the work of i man 6 
months, or \ man i year, engaged in the repairs of machinery, 
and 1,000 barrels of flour delivered in New York represent only 
the direct labor of only 4 men for i year. 

In the Howe National Bakery of New York labor and material 
are economized to the utmost, and the bread is sold over the 
counter with the least waste of force. The conversion of 1,000 
barrels of flour into bread and its sale represent the work of only 
3 persons working i year. The modern miracle is that 7 men serve 
bread to 1,000 persons, and in so doing earn high wages for them- 
selves, while the owner of the bakery earns his private fortune in 
selling good bread at 4 cents a pound or less. His six cent loaf 
which is upon the table before me weighs if pounds. None need 
ask better bread. 

The entire profit of the railroads for moving 5,500 bushels of 
wheat 200 to 300 miles, and 1,000 barrels of flour 1,400 miles, at the 
present rates, has been computed by one of the most competent 
experts at ^225 — being 15^ per cent, of the charge of $1,440. 
That is to say, the profit of the railway for bringing 1,000 barrels 
of flour 1,627 miles is 22-|- cents per barrel — ^just one half the cost 
of the barrel in which the flour is packed, or a trifle more than 
the value of the empty barrel in New York. In the diagram 
which I submitted to the Senate Committee, I gave the price of 
bread in the small shops where the poor deal in Boston — the cost 
of bread in a small bakery. I assigned 30 per cent, of the railroad 
charges to profits. Now I have exact data from the railroads, and 



298 THE RAILWAY, THE FARMER, AND THE PUBLIC. 

I use the figures of a baker who bakes at wholesale, but sells bread 

at the least charge. These figures prove that the poor of New 

York are served with better bread at much less price than are the 

poor of Boston. 

Wheat assumed to be raised near Glyndon in Dakota : 5,625 

bushels to one man's work ; 1,125 retained for seed or for domestic 

consumption. 

$3,150 Price of 4, 500 bushels wheat at 70c., delivered at the railroad. 

Total ( 1,215 Cost of railway service 4,500 bushels wheat 200 to 300 miles, 
charge \ 1,000 barrels flour 1,400 miles. 

to N. Y. ( 225 Profit on the railway service. 

500 Milling 1,000 bushels flour. 

450 Barrels for 1,000 barrels flour. 

1,750 Labor, fuel, yeast, etc., used in making 275,000 pounds of 
bread. 

500 Cost of selling the bread. 

210 Incidentals. 



$8,000 Cost of 275,000 pounds of bread in New York ; or, 7 men 
feed 1,000 for i year with bread. 

If the labor of those who provide fuel and other materials for 
the railway and for the baker be added, the number might be 
raised to 10 men to 1,000 barrels of flour converted into bread. 

At the risk of repetition let me again give other examples of the 
saving of labor which has resulted from the application of ade- 
quate capital and skilled labor. The year's work of i person is as 
follows : I in a cotton mill spins and weaves cotton cloth for 250 
persons ; i in a woollen mill, woollen cloth for 300 persons ; i 
in a coal mine, iron mine, or iron furnace serves 200 pounds iron 
each to 500 persons ; i in a men's boot factory makes 2 pairs a 
year of boots or shoes for 800 persons ; i in a women's boot or 
shoe factory makes 3 pairs a year for 1,000 persons ; i in a shirt 
factory sews 2,400 excellent shirts, or more of lower quality, or 4 
a year for 600 to 800 persons. 

The poor sewing women are only those who sew in a poor way 
by hand. Skilful sewers in the shirt factory earn more than %\o 
per week. How much labor the materials used may represent is 
not included in these computations. In the case of the bread the 
wheat is traced from the beginning to the end. It may be admitted 



THE RAILWAY, THE FARMER, AND THE PUBLIC. 299 

that this is an extreme case, and that the average production of 
wheat, except on these great bonanza farms, so-called, represents 
a much greater amount of labor. I have only presented the ex- 
treme of the present because it may become only the average of 
the future, but that part of the cost of the bread which constitutes 
the railway service leaves little margin to be gained until some 
new invention is applied by which the cost may be reduced. The 
profit of the railway on each pound of bread is xoVo of a cent. 
The anti-monopolists cannot save much on this, even if they 
should elect their candidate President of the United States. 

The statement that the wheat from which 1,000 barrels of flour 
may be made, which represents the yearly ration of 1,000 persons, 
can be raised as the equivalent of one man's labor for one year, 
may be questioned. It seemed almost incredible to the writer 
until he had proved it by incontestible evidence of many com- 
petent witnesses. A fair average equivalent for one day's work 
of one man on a Dakota farm is 12 J bushels of wheat in an ordi- 
nary season. On a well managed and thoroughly equipped farm 
in a season in which the crop is 20 bushels to the acre, the 
average for one day's work of one man has proved to be i8f 
bushels. This season, when the crop is expected to be 25 bushels 
per acre, it will be over 20 bushels per man per day. That is to 
say, the average per man per day is very nearly the product of 
one acre, whatever that may be according to the season. If we 
multiply the middle statement of i8f bushels per man per day by 
300 working days, we have 5,625 bushels of wheat as the equiva- 
lent of the continuous work of one man for one year ; but of 
course about three men will be employed for only part of a year, 
or during the wheat-growing and harvesting season. After the 
wheat farm has been fully equipped with adequate machinery and 
brought into good condition, the crop can be planted, made har- 
vested, and moved to the elevator at a cost ranging from $6.00 to 
$10.00 per acre, according to relative conditions ; it is claimed 
that on the best farms most completely equipped the whole cost can 
be covered at $5.00 per acre. It may be said that this cannot 



300 THE RAILWAY, THE FARMER, AND THE PUBLIC. 

last, but such a hasty conclusion may not be warranted. There 
are as yet, no signs of exhaustion ; the soil of this section appears 
to be of a peculiar kind. The frost strikes deep into the ground, 
and long before it is out below, the surface is dry, warm, and 
ready for the seed ; after that the moisture from the melting frost 
keeps coming up laden with elements of fertility. How long this 
will continue who can tell ? But even if it may only last a few 
years, then after that the division of the land into smaller farms 
will bring in fertilizers and other methods of economic cultivation. 
In the meantime what is the area available ? The area of Dakota 
only is 150,000 square miles, of which but a mere fraction is yet 
under the plow, and north of it is the almost unlimited area of 
wheat land in Manitoba. Is it not apparent that wheat may go 
even below thirty-four shillings per quarter in Mark Lane before 
the supply of wheat from Dakota would cease to meet the demand, 
except the demand of our own country should stop the export 
tide ? With our present railway and steamship service, even at 
paying or profitable rates of traffic, our farmers can unquestionably 
contest the markets of Europe with India and Russia, down to 
less than thirty-four shillings a quarter in Mark Lane, if they can- 
not do better at home. The English quarter of wheat by which 
prices are quoted is 480 pounds, or 8 bushels of 60 pounds each 
— thirty-four shillings per quarter will yield a little over one 
dollar per bushel in London, at which we can readily continue the 
traffic, but of course at a greatly reduced profit to the farmer. The 
India railways, for which a very large appropriation is about to be 
made, will doubtless render the competition in India a little 
sharper, but it will be observed that the system adopted has been 
planned mainly with reference to the distribution of food in India 
itself, for the purpose of preventing the recurrence of famine. It 
will therefore increase the consumption of food in India, and may 
diminish the export of grain to England instead of increasing it. 

July, 1884. 



OCCUPATIONS CLASSIFIED. 



There can be no better way of .presenting the immense impor- 
tance of this problem in respect to the distribution and use of 
food, Avhile incidentally enforcing the need of manual as distin- 
guished from purely mental instruction, than by classifying the 
whole force of persons who were engaged in gainful occupations 
in the census year according to the kind of work done by each 
class. 

This force numbered 17,392,099, or a fraction less than one in 
three of the population. The list of their occupations is as ac- 
curate as the enumeration of the population itself, because it was 
made by the same enumerators. The only qualification to be 
made is that many laborers are listed as "laborers not specified," 
who may have been on farms ; and doubtless many men are listed 
as mechanics, whose work was done in connection with a manu- 
facturing establishment. In consequence of the latter fact, the 
separation of the mechanics or artizans whose work was " indi- 
vidual " from those who formed a part of a " collective " force 
employed in a factory, can only be made approximately. 

The following table gives a very close approximation to the 
number of persons in each one thousand who were occupied in any 
kind of gainful occupation in the census year : 

Class I. — Purely mental and individual work : 

Clergymen, lawyers, physicians, surgeons, chief officers of banks, tele- 
graph companies, railroads, insurance companies, and other occu- 
pations of like kind ......... 40 

Class II. — Distributive ; in part mental, in part manual, in part col- 
lective, in part individual : 
Merchants, tradesmen, clerks, hotel-keepers, commercial travellers, 

salesmen, and saleswomen ........ 60 

' These tables belong to and are to be considered in connection with the 
matter in Appendix VII., following the essay on wages. See p. 171. 



302 



OCCUPATIONS CLASSIFIED. 



Class III. — Manufacturing or mechanical of the collective order — 
that is to say, occupations in which large numbers of persons are 
concentrated in factories : 
Textile factories, iron and steel works, machine shops, clothing, hat, 

boot and shoe factories, or other analogous works, g2 to lOO, say . loo 
Class IV. — Mechanical pursuits, mainly individual rather than col- 
lective : 
Carpenters, blacksmiths, masons, wheelwrights, painters, etc., etc., 107 

to 115, say ........... 107 

Class V. — Personal service : 

Domestic servants, draymen, employes of railroad, telegraph, tele- 
phone, and express companies, steamboat men, sailors, waiters, 

etc 131 

Class VI. — Laborers : 

Farm laborers (191), laborers not specified (107), miners (14) . . 312 
Class VII. — Agriculturists : 

Farmers, stock-raisers, etc. etc. 250 



Total 



' 1,000 



It may be held that the food of the members of Class I., and 
the servants in Class V., will be intelligently purchased and used, 
and that a lessening proportion of those engaged in collective 
work, Class III., will be served with the economy of the collective 
or boarding-house system. 

On the whole, it may be held that 900 out of each 1,000 will 
buy and use food according to the measure of their own personal 
faculty in the matter, and that the lower the grade of the work- 
man, the greater the want of economy in buying and the greater 
the waste in use. 



' If we adopt the classification of the census, we find the following proportions 
in each 1,000 of the people who are occupied in gainful occupations. 



Total. 



Southern States, inc. Delaware and Mo. . 
Middle States, inc. N. Y., N. J-. Pa. . 
Western and N. Western and Territories 

New England 

Whole country 





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1,000 
1,000 
1,000 
1,000 



OCCUPATIONS CLASSIFIED. 303 

The absolute necessity for manual as well as mental instruction 
Is proved in the most conclusive way by a comparison of the pro- 
portion which the work which is mdividual bears to the work 
which is collective. In the one case personal faculty, or " gumption," 
is the quality which assures success ; in the other, long practice 
in a single one of many processes. In this again may be found 
the proof that the rate of wages is finally determined mainly by 
personal qualities, and rests at last on individual character, ca- 
pacity, and moral integrity. 

May not one find in the forces developed by modern science 
such an assurance of abundance that moderate intelligence, good 
health, and industry will certainly secure a good subsistence, in 
which case it may not pay to be rich ? 

The two conclusions which must be drawn from these tables 
are : 

I St. The relatively small proportion of all persons engaged in 
productive work who have been able to reach a plane above that 
of the laborer or domestic servant, or of the small farmer who 
works harder for a meagre subsistence than any of his hired 
men. 

2d. The small relief which has yet been given by the adop- 
tion of the collective factory system, — by the use of automatic 
machinery and by the division of labor. 

In this country at least this relatively low plane on which more 
than one half the working people are still to be found, cannot be 
attributed to any lack of or monoply of land. There is far 
more land waiting for laborers capable of gaining their subsist- 
ence from it than has yet been put to any productive use. 

In fact, both land and capital are in such abundance that every 
person, capable either of using the land or of applying capital 
thereto, is being sought for by the representatives of railways 
and of other corporations. 

Under such conditions can there be any thing wanting except 
those personal qualities which have been named on which the 
rate of wages finally depends, or by which the rate of wages is 
finally made, — character, capacity, and industry ? 



WHAT MAKES THE RATE OF WAGES? 



(addenda to second edition.) 

Since the completion of the treatise upon " What Makes the 
Rate of Wages ? " the attention of the writer has been called to the 
great importance of a correct analysis of the occupations of the 
people of this country, and to the necessity for such an analysis 
before any scientific treatment of the three great issues now 
before the public can become even possible. 

These three questions are : 

1. The Railway Service, and the proposed regulation thereof 
by the Government. 

2. The Silver Coinage and the Acts of Legal Tender. 

3. The Collection of the National Revenue, 

All of these questions are but phases of the major issue in 
respect to the relations of labor and capital, or branches of the 
final question — What makes the rate of wages ? 

We may first consider the occupations of the people by sections, 
in their effect upon the traffic of railways, and for this purpose 
we may make use of the census classification. 

The table of the occupations of all who were engaged in gain- 
ful employments may be accepted as one of the most accurate in 
the census of 1880, in view of the fact that the same enumerators 
who counted the population also made this list, and each person 
enumerated gave his or her own occupation. 

The census classification is into four groups, viz. : 

1. Farmers and farm laborers. 

2. Professional and personal service. 

305 



306 THE RATE OF WAGES. 

3. Trade and transportation. 

4. Manufactures, mechanics, and mining. 

In the following table the relative proportions engaged in each 
occupation in each 1,000 are shown as to the whole country, and 
as to each section : 

Now, if we consider this table a priori, what might we expect 
to find the relative railway traffic to be ? 

In the New England States, where the manufacturing and the 
mechanic arts give employment to the largest number of persons, 
and where the population is dense, we should expect to find the 
largest number of passengers to each mile of railroad. In the 
Southern States, where population is widely scattered and is 
chiefly engaged in agriculture, and where almost all the crops are 
light in weight, we should expect to find the least number of 
passengers and tons of merchandise per mile. 

In the Middle States, which are both manufacturing and com- 
mercial, and through which the heavy Western crops are moved, 
we should look for the greatest quantity of merchandise per mile, 
and in the grain-growing States of the West we should look for 
heavy traffic in merchandise and a small number of passengers 
per mile. 

The facts fully justify the theory, and although the two fol- 
lowing tables do not absolutely follow the same rule of sectional 
division, yet the analogy of the respective laws of distribution is 
very plain. 

PROPORTIONAL MOVEMENT OF PASSENGERS AND MERCHANDISE SHOWN BY SEC- 
TIONS, THE DIVISIONS BEING MADE ACCORDING TO THE NATURE OF THE 
TRAFFIC. 

Section i. — New England States. — Food and Fuel, moved in ; Manufactures, 
moved out and distributed. 

Section 2. — Middle States (New York, New Jersey, Pennsylvania, Delaware, 
and Maryland). — Food, moved in and through ; Fuel and Metal, 
moved out ; Manufactured Goods, moved out and distributed. 

Section 3. — Western States (Ohio, Michigan, Indiana, Illinois, Wisconsin, Min- 
nesota, Iowa, Kansas, Missouri, and Nebraska). — Food and 



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WHA T MAKES 



Timber, moved out ; Manufactures, moved in ; Fuel, etc., dis- 
tributed. 
Section 4. — Southern States — Cotton, Wool, Hemp, Tobacco, and some Metal, 
moved out ; Food and Manufactures, moved in ; local distribu- 
tion. 



Passen- Passen- 
Miles gers gers per 

R. R. Carried. Mile. 
Section i. — N. E. 6,323 72,3771556 ",446 



Proportion per Mile. 



Section 2. — Mid. 17,131 126,354,067 7,376 
Section 3.— West 60,525 83,823,759 1,385 I 
Section 4. — South 26,135 '7, 453, 579 668 



Miles Tons Tons per 

R. R. Carried. Mile. 1 

Section I. — N. E. 6,323 30,670,213 4,850 | 

Section 2. — Mid. 17,131 186,736,924 10,900 

Section 3. — West 60,525 144,853,216 2,393 
Section 4. — South 26,135 31,014,619 1,187 



FREIGHT MOVEMENT. 
TABLE II. 

Proportion per Mile. 



Tons Carried 
One Mile, _ 
Section 1. — N. E. 285,797 



TABLE III. 

Proportion to Each Mile. 



Section 2. — Mid. 936,890 
Section 3. — West 356,585 
Section 4.— South 126,292 



The importance of this classification will be very apparent when 
we consider the relation which volume of traffic bears to rates of 
charge for such service. 

While it does not follow absolutely that the more freight and 



THE RATE OF WAGES? 3O9 

passengers a railway system is called upon to move the lower may 
be its rates, yet it is a law that unless a railway system is worked 
up to the capacity of such equipment as it must have in order to 
work at all, its rates of charge must be higher in inverse propor- 
tion to the amount of its traffic. Hence it follows that after all 
due consideration has been given to grades, length of haul, ter- 
minals, fuel, and to the quality of the traffic ; and after the rates 
have become adjusted so as to meet all these complex and con- 
fusing elements of the problem, the number of tons and of pas- 
sengers will then constitute a finally controlling element. Those 
railways which are in the great lines of movement of grain (now 
about 100,000,000 tons per year), fuel (now about 90,000,000 
tons), timber, and other heavy substances, must and will be worked 
at a much less cost and at a much lower charge per ton than 
those railways whose traffic consists almost wholly of fibres 
(2,000,000 tons), metals (6,000,000 tons), and general merchan- 
dise or food for local distribution. 

Under these conditions, the more the attempt is made to control 
the rates of traffic by statute, the higher the rates charged must 
be, because it is very plain that the rates on railways which have 
a small traffic cannot be reduced by statute to the level of those 
which have a heavy traffic unless the State takes them and 
operates them at a loss ; and therefore it follows of necessity 
that statute interference can only end in an advance of the low 
rates now charged on the lines having a heavy traffic to the higher 
rates of the lines having a small traffic, if the statutes do not prove 
to be inoperative. Such statutes have up to this time utterly 
failed, after a period of ineffectual disturbance to the whole traffic 
of the country. 

The main interest, however, in the classification of occupations 
is the clue which it gives to the small compensation or rate of 
wages for which it appears that a very large portion of the people 
must work, because there is no more to be divided among them. 

The classification of the census under four heads is of no value 
for this purpose, because it places domestic servants and commoii 



3IO THE RATE OF WAGES. 

laborers in the same category with professional persons. We 
may, therefore, sort all persons occupied into seven groups : 

For this classification into seven groups only approximate accu- 
racy can be claimed, for reasons which are given hereafter ; but 
the main feature, to wit, the relatively low grade of the work, and 
therefore low wages of a very large portion of the people, is un- 
pleasantly conspicuous. A little less than one in three of the 
whole population is engaged in gainful work, and if my computa- 
tions are approximately correct the share which each person of 
each group of three of the so-called " working classes " can have is 
only what forty to forty-five cents a day will buy. When depres- 
sion reduces even this low measure, what wonder that trouble 
ensues if injustice is even suspected in the social order by the 
uninformed or ignorant ? 

In the following table the specific numbers in each separate 
occupation are sometimes given from the census data exactly, and 
sometimes by computing together in round approximate figures 
those whose occupations are analogous. The shading in the 
graphical lines is intended to show approximately the proportion 
of each class whose earnings may be above the average of annual 
income, as compared with those whose earnings are at that rate or 
below it. No absolute data exist for making this last separation, 
• — it is by estimate only. 

We may consider this table, not only because of the picture 
which it gives us of the planes into which society is now stratified, 
if such an expression may be used, but also in the relation of each 
class to the other in its purchasing or exchanging power ; and, 
finally, in the effect which a lack of occupation on the part of any 
large number in the lower planes must have upon the demand for 
the products of capital or upon the prosperity of those in the 
higher planes. 

In Class I, consisting of persons whose work is purely mental, 
are to be found all teachers, country clergymen, literary persons, 
journalists and the like, comprising more than one half of the 
whole number ; and in this category will be found a very large 



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312 



WHA T MAKES 



proportion whose purchasing power is not on the average above 
that of a first-class mechanic. In Class II one half of the num- 
ber consists of clerks, salesmen, saleswomen, and other minor em- 
ployes, whose purchasing power would stand between that of a 
factory operative and a good mechanic. 

Subdividing these two classes, we then have among every t,ooo 
in purchasing power — 

GRADE I. 



Persons of high purchasing power — 

Class I, one half 

Class II, one half . 

To these may be added perhaps one fifth of Class VI, pros- 
perous farmers , 



20 

30 



so- 



Medium purchasing power — 

Class I, teachers, etc., one half 
Class II, clerks, etc., one half .... 
Class III, factory and machine-shop operatives, all 
Class IV, mechanics, all .... . 
Class VI, two fifths of the farmers 

GRADE III. 



20 

30 
100 
107 
IOC- 



Lowest purchasing power — 

Class V, servants, etc. ....... 131 

Class VI, two fifths of the farmers . . . . , . 100 

Class VII, laborers ........ 312 — 



Total 



357 



543 



1,000 



Factory operatives are classed in Grade II, because their food 
is usually purchased with intelligence at low prices. 

From this analysis it will appear how much the activity of trade 
may depend upon the purchasing and consuming power of Grade 
III, numbering more than one half of the whole working force. 

The greater part of what is called " the business of the coun- 
try " consists in the exchange of the necessities of life. The 
difference in the actual consumption of food, fuel, and clothing 



THE RATE OF WAGES? . 313 

between the rich, the well-to-do, the mechanic, the operative, and 
the laborer, consists more in quality and method of service than 
in quantity, and therefore any lack of occupation which deprives 
a large number even of common laborers of their customary 
supply of such articles will affect the trade of the merchant, the 
traffic of the railway, and the sale of the products of the manu- 
facturer in vastly greater measure than a temporary commercial 
crisis which only changes the ownership of realized wealth. The 
present period of depression must be considered in this light ; it 
is very different from the ordinary commercial crises such as those 
of 1836 and 1857. 

Let it be remembered that in 1882 about 650,000 men, 
mostly laborers, were employed in the mere construction of rail- 
roads, and that in 1884 not exceeding 220,000 were occupied in 
this work. Let it next be remembered that in 1880, 1881, and 
1882 there was a rapid and progressive increase in the number of 
factories and works of all kinds, which had almost wholly ceased 
in 1884, from which cessation perliaps not less than 250,000 men 
must have been thrown out of employment. In these two facts 
we have evidence of lack of customary employment for about 
680,000 men, or nearly 8 per cent, of the whole consuming force 
in Grades II and III. 

Whenever this partly idle force shall have been placed on new 
land or found new work, or whenever confidence and capital be- 
gin to work together on the old lines, the present depression may 
end and prosperity may be renewed. 

It is the common laborer who suffers most in a period of depres- 
sion, and if I am even approximately correct in my estimate of the 
number of laborers discharged by the cessation in the construc- 
tion of railways, mills, and works, not less than one quarter of all 
the laborers not listed as on farms have thus suffered. In a true 
diagnosis we must find the seat of the disease before we can 
apply the remedy. 

Only approximate accuracy can be claimed for the analysis con- 
tained in the foregoing table, because the groups are not capable 



314 WHAT MAKES 

of absolute definition. It is suggestive rather than conclusive. 
For instance, all that were occupied as machinists, on clothing, 
boots or shoes, milliners and the like, have been placed in the 
collective factory work, because such is the tendency of these 
arts ; but many such persons belong in the mechanical group, not 
collective but individual. 

On the other hand, many of those placed in the latter class are 
doubtless connected with large factories. The doubt having been 
given to the collective factory group, which actually counts only 
92 to 93 instead of 100. This classification may be accepted as 
fairly accurate, and it shows a somewhat surprising result. It 
proves how little we have yet displaced handwork and individual 
faculty or gmnption by the substitution of automatic machinery. 
The improvement in the tools which are guided and directed by 
hand and brain has perhaps been much greater than the substitu- 
tion of automatic machinery. 

There is less uncertainty in regard to the other groups. One 
thing is very certain, and that is by far the greater portion of all 
who are occupied in any gainful work are in the position of wage- 
laborers or small farmers, and therefore any cause of depression 
which impairs their purchasing power by lack of employment, or 
by reducing their wages or earnings, must react with very great 
severity upon the profits of manufacturers and merchants. So 
far from the interests of the several classes being antagonistic, 
they are interdependent, and there is nothing so adverse to high 
profits of capital as low wages for labor. Where is the remedy ? 

The period of depression through which we are passing is very 
similar to that which ensued after the so-called panic of 1873, and 
may find the same remedy, unless the world is really overstocked 
with the products of agriculture ; a condition which at any rate 
cannot last long. Given a demand for grain, meat, and dairy pro- 
ducts, the land still offers relief, and it is in a redistribution of 
laborers upon new land that relief must soon come. 

It will be observed that in this, as in other periods of depres- 
sion, the sales of government and of railroad lands have been very 



THE RATE OF WAGES? 315 

large, but the change in the distribution of labor by a transfer to 
new land is very slow, and a long time elapses before new settlers 
become large consumers of manufactured goods. People continue 
to wear old clothes when out of work or when changing their 
mode of life 

The cessation of constructive enterprise in 1872-73 was very 
sudden, the redistribution of laborers afterward was very slow, but 
by January i, 1879, when the specie standard was restored and 
all doubt ceased for a time as to the stability of the currency, 
every condition was ripe for the activity and prosperity which 
ensued. 

In the same way, and in even greater measure, after the exces- 
sive railway construction of this decade culminated in 1882, the 
cessation of constructive activity in all directions was sharp and 
severe, but since then the redistribution of labor has been steadily 
progressing, and if all doubt as to the stability of the currency 
could be again removed by the cessation of the coinage of silver, 
a period of activity and prosperity might quickly come. 

Our population is now gaining with great rapidity, and the ab- 
solute demand for shelter, clothing, subsistence, and additional 
means of communication for this increase cannot be long held in 
abeyance. The country is full of all the elements of wealth, and 
just as the restoration of the specie standard in 1879 gave the 
necessary confidence then, so might the cessation of the coinage 
of silver dollars give confidence in the stability of the standard of 
value now, so that the activity and prosperity of 1880 might recur 
in 1885 if Congress would act at once. 

The number of persons out of work at any given time is always 
exaggerated, because common laborers, when out of work, always 
flock to the city in search of employment, and, being thus concen- 
trated, appear to be in greater force than they really are ; yet, 
when even a small percentage of labor is idle, it has the same effect 
on the general market for labor that a small excess of goods has on 
the market for goods. One adverse condition reacts upon the 
other rendering both more intense until the time arrive^ when con- 



3 1 6 WHA T MAKES 

structive enterprise can no longer be deferred, then consumption 
is renewed at its normal rate. 

The only question now is: Has the time arrived in 1885 for 
preparation to be made for the increase of population of about 
2,000,000 in 1886 ? 

Even in 1884 we have found it necessary to add 4,000 miles of 
railway. Shall we need 6,000 presently in one year ? If so, over 
100,000 idle men will be set to work on 2,000 miles of additional 
track. 

Will each family of five in the increase of 2,000,000 require 
a house, or part of a house, and furniture at an average cost of 
$500 per family ? If so, the work of 500,000 mechanics and 
laborers will be needed at $5400 each per year to supply them. 

What other provision must be made ? Each one can reply ac- 
cording to his judgment. Suffice it that at a certain date, sooner 
or later, constructive enterprise must begin, and when it does every 
man now idle will be set to work and many more will be needed. 
With an excess of capital waiting to be invested and an excess of 
labor waiting to be used, and with a peremptory necessity for con- 
structive work near at hand, what other cause can be assigned for 
continued commercial depression, except the uncertainty as to the 
standard of value which is caused by the coinage of low-priced silver 
dollars ? 

The utter insignificance of the silver product as compared to 
others is shown by the accompanying table. I have called the 
silver interest a " fly-speck." Are the conditions now ripe for 
prosperity to be retarded in their beneficent action in deference 
to a political and economical " fly-speck " ? 

It is possible, by a graphic comparison of the annual value of 
our product of silver with those of food, clothing, and other 
staples — at present reckoned on the gold basis of 100 cents to the 
dollar, — to give a clearer notion of the confusion into which the 
business of the country is sure to be thrown if the act for the 
enforced coinage of silver is not soon repealed. 

The following table gives the relative value of the silver product 



THE RATE OF WAGES? 



317 



of the United States, shown by a comparison with some other 
important articles of consumption. The value of the articles of 
food given is on the basis of the average consumption of each 
person in the United States (counting two children under ten as 
one person) being assumed to be equal to the ascertained con- 
sumption of cotton-factory operatives in New England and in the 
Middle States. The estimates of the value of clothing and other 
articles made from fibres, and of cotton, wool, and iron, are approx- 
imate, but sufficiently accurate for purposes of comparison. Popu- 
lation reckoned at the consuming power of 50,000,000 on a probable 
total population of 57,000,000, counting two children under ten as 
one adult. 



1. Meat, poultry, and fish, 9 

7-10C. worth per day 

2. Clothing, carpets, etc., $30 

per year each . 

3. Dairy — \ pint milk, i| oz. 

butter, scrap cheese, all 
SC per. day 

4. Bread — ibbl. flour per year, 

bread at 2|c. per day 

5. Vegetables at a cost of i 

98-iooc. per day 

6. Sugar and syrup, i 94-iooc. 

per day .... 

7. Tea and coffee, i 2-iooc. per 

day 

8. Fruit, green and dry, 

62-iooc. per day 

9. Domestic eggs, i every 

other day, 12c. per dozen 
[o. Salt, spices, ice, etc., 
49-iooc. per day . 




912,500,000 

456,000,000 

360,500,000 

353,000,000 

185,000,000 ^^^3 

113,000,000 I 

91,250,000 ^a 

89,000,000 g 
5,825,250,000 Food and Clothing. 



[I. The cotton crop, 6,000,000 

bales, at $50 . . . 300,000,000 ^ 
[2. The pig-iron product, 

4,250,000 tons, at $20 . 85,000,000 ^g 
[3. The wool clip, 320,000,000 

. lbs., at 20c, . . . 64,000,000 ^ 
Silver product, at gold value, 

only 40,000,000 I 



3l8 WHAT MAKES 

The above ration of sugar, tea, and coffee of the factory opera- 
tives is, doubtless, considerably above the average of the whole 
country ; but the ration of food taken, as a whole, is not a very 
large one, as will be seen by a reference to the items in the preced- 
ing treatise. This table is based on the statistics of the food con- 
sumed by adult women chiefly ; men consume a larger ration of 
meat and less tea, coffee, and sugar. 

It will be observed that the three products which claim special 
legislation most urgently, to wit : pig-iron, wool, and silver com- 
bined are worth only $189,000,000, which is less than the value 
of poultry and eggs, and but a small fraction of the value of the 
products of the dairy in each year. 

The value of the total consumption of the United States may 
now be computed (1885) at about $11,400,000,000. The graphical 
line representing it would be nearly six and a half times the upper 
line shown in the table, with which the fly-speck which represents 
silver may be compared. More than one half of the silver produc- 
tion is purchased by the Treasury for coinage. 

The foregoing list of articles of food and clothing amounts to 
$5,800,000,000 (omitting raw cotton and raw wool, and treating 
pig-iron separately). It represents a somewhat less sum than is 
probably paid by the people of the United States for such articles. 
The basis of the table, so far as food is concerned, is on 
the standard of the actual consumption of factory operatives, 
chiefly women, at a cost of 23 iVo^. per day, or $1.67 per week. 
It is probable that the average cost in money of the food of adults 
is more than this, although it is not probable that they average as 
good a ration for their money, the food of these operatives being 
bought at wholesale prices. Food, drink, and clothing cost the 
consumers of this country about $6,500,000,000 per year on the 
basis of the present population. Pig-iron, when converted into its 
final form of bars, rails, castings, bolts, nuts, and the like, probably 
adds $300,000,000, and there still remain timber, stone, and all 
material for shelter to be added. As I have stated the value of 
all the products of this country at this time is probably over 



THE RATE OF WAGES? 319 

$11,400,000,000 — or, deducting the domestic consumption of 
farmers, our commercial product at the point of final consumption 
is worth over $10,000,000,000 ; but, it must be remembered that in 
the process of exchange and of conversion this whole product will 
have been bought and sold twice, thrice, or more times. Before 
it reaches the consumer the wheat has been sold by the farmer 
to the miller, the flour has been sold by the miller to the merchant, 
and by the merchant to the baker, and the bread has been sold to 
the consumer. The business transactions — the purchases and sales 
of this country — must approximate $30,000,000,000, or between 
five and six hundred dollars a year per capita, in the mere trans- 
actions relating to shelter and subsistence. 

Whatever the final amount may be, the prices are now adjusted 
to the standard of the gold dollar, rated at 100 cents. 

When the standard is changed to silver at 82 cents to 85 cents, 
as it surely will be unless the coinage of legal-tender silver 
dollars is soon stopped, the prices of this immense volume of con- 
sumable commodities as well as of all other property not enumer- 
ated, must rise in just the proportion that the standard of value is 
lowered. This rise will be very slow, because consumption has 
been so much reduced by uncertainty. The probabilities are that 
while this adjustment is in process wages will keep where they are 
or go lower, while the money cost of living will become greater. 
In such periods the rich grow richer at the cost of the poor, but 
the principal loss falls on the persons of moderate means. 

The absolute necessity of preparation for an increasing popula- 
tion may counteract these tendencies in a measure, but no 
enterprise or vigorous activity will be possible, and, on the 
whole, depression and want of work will be continued, in the face 
of rising prices and increased cost of subsistence. 

The legislators who sustain the present acts of coinage, which 
are approved neither by bimetallists nor monometallists, will be 
responsible for the disturbances which will ensue. 

Having thus considered the distribution of occupations with 
reference to the Railway Service and the Silver Coinage, we now 



320 WHAT MAKES 

come to the apparently more complex but really much more 
simple question of 

THE COLLECTION OF THE NATIONAL REVENUE. 

It is held by one school that domestic industry will be protected 
by the imposition of duties under a tariff in such a way as to raise 
the price of such foreign articles as can be made in this country, in 
order that various arts may become established which it assumed 
might otherwise be of very slow growth, or perhaps might not be 
undertaken at all. 

It is held by another school that domestic industry will be most 
fully promoted by levying duties or taxes exclusively on articles 
which are of voluntary use, which do not enter directly into the 
processes of domestic industry, or which cannot be produced 
in this country advantageously, if at all. 

It is not the purpose of this treatise to discuss the merits or de- 
merits of either system but rather to define the necessary condi- 
tions, and to state the facts which must be accepted by the 
respective advocates of both systems, if any scientific result is to 
be reached. 

Three questions are presented to which a sufficient answer can 
be given by an analysis of the table of occupations. 

I St. — What proportion of the gainful occupations of the people 
must be carried on within the limits of our own territory because 
they could not be conducted as well elsewhere ? 

2d. — What proportion of all who are occupied depend upon 
a foreign market for the sale of their product ? 

3d. What proportion of all who are occupied could be sub- 
jected to foreign competition ? 

Agriculture is the most important of all occupations. In the 
census year it gave employment to 7,670,493 persons, and prob- 
ably to a greater number, as the Superintendent of the Census 
remarks that many of those who reported themselves simply 
as laborers were probably /^r^ laborers. The census does not in- 
dicate the proportion of persons to each special crop, but if con- 



THE RATE OF WAGES? 32 1 

sideration be given to the estimate of the crops at their farm values, 
the total product of agriculture possessed a value in the census year 
of $3,726,331,422 ; or, with transportation added to the place of 
export, or of wholesale distribution, the total approximated $4,000,- 
000,000 in value. The declared wholesale value of the products of 
agriculture exported in the same year was $685,961,091, which ir, 
17 -^/-g- per cent, of the whole. At the present time it would be 
somewhat less. If we apply this percentage to the whole number 
of persons listed specifically as occupied in agriculture in the 
census year it gives us 1,315,000 persons engaged in domestic 
agriculture whose market was a foreign one. If the number 
occupied in agriculture was greater, then this number must be 
increased. 

On the other hand, we find among the products of agriculture 
which could be wholly or in any substantial part imported — only 
sugar, swamp rice, a part of the wool, tobacco, barley, and hemp, 
and a few minor articles, — the possible import of what was pro- 
duced here not exceeding $100,000,000, or two and a half per 
cent. Applying this percentage to persons, we get 192,000 whose 
occupations might be affected by changes in the revenue system. 

If we next consider the several classes of occupation, aside from 
agriculture, we find that the all of Class I, who were engaged 
in professional work, or as officers of railroad, insurance, and other 
similar corporations ; all of Class II, who were engaged in dis- 
tributive work, as merchants, traders, and their employes ; sub- 
stantially all of Class IV, engaged in mechanical work of the 
individual rather than of the collective kind ; and all of Class VII, 
laborers and miners, with the exception of about 32,000 iron 
miners and 20,000 coal miners supplying blast furnaces, must 
have lived and worked within the limits of the country, and in 
such parts of the country as are consistent with the vocation of 
each individual, because their work could not be done elsewhere. 

There remains Class IV, comprising at the utmost 1,740,000 
persons, engaged in collective factory work. Of this number a 
large portion of those who were engaged in metal and machine 



322 WHAT MAKES 

work, almost the whole number employed in making clothing, 
boots, shoes, and hats, and by far the largest portion of those en- 
gaged in the lesser branches of collective factory work, such as 
wood-working, and other kindred arts, must have followed their 
work not only within the limits of the country itself, but in such 
particular part of the country as was best suited to their special 
work. Of the whole number of this class, computed at 1,740,000, 
possibly 740,000 might be in part subjected to competition from a 
foreign country ; to whom may be added 260,000 agriculturists 
and miners, making 1,000,000 in all. 

Each person's judgment would vary somewhat as to the pro- 
portion of the persons engaged in manufacturing, mining, and 
agriculture, whose product could be imported at this time if no 
discrimination were used in the imposition of duties, but it is im- 
possible to reduce the problem to absolute terms. So long as 
duties are imposed on ores, coal, wool, chemicals, and other 
articles, which enter into the processes of domestic Manufactures, 
the import of articles made of iron, cloth, and other finished articles 
will be greater. The proportion of all persons occupied who can 
be subjected to foreign competition may be estimated at between 
four and six per cent, of the whole ; a proportion which repre- 
sented between 700,000 and 1,050,000 persons in the census year. 

Paying no regard to the small proportion of domestic manufac- 
tures exported, the general result appears to be that in the census 
year 1,300,000 to 1,350,000 persons occupied in agriculture 
depended upon a foreign market, and from 700,000 to 1,050,000 
were occupied in some kind of production which could have been 
imported wholly or in part. Assuming the maximum in each 
case, we find, in round figures, 2,400,000 persons employed whose 
occupations were directly connected with or affected by foreign 
commerce. The remainder of tlie working force, 15,000,000 in 
number, living within our limits, were, of necessity, occupied in 
kinds of work which could only be done within the same limits. 
Hence the vast and necessary preponderance of domestic over 
foreign commerce. 



THE RATE OF WAGES? 323 

It will be apparent that these conditions which exist in the 
nature of things must be fully comprehended before any intelli- 
gent legislation can be had in respect to national taxation, 
whether the revenue is to be sought either under an excise or from 
a tariff. 

The importance of our foreign commerce is not, however, to 
be measured by the ratio which it bears to domestic traffic. Pos- 
sessing as we do the most adequate resources, and the cheapest, 
because the most effective, labor of the world, we are enabled to 
supply our own wants, and yet produce an excess of staples which 
the world must have. Hence it follows that imports and exports 
constitute the balance-wheel by which the price of our whole 
product might be maintained more uniformly than it is, were it 
not for the obstruction of ill-adjusted taxation. The effect of 
these obstructive duties upon the import of articles which enter 
into the processes of domestic industry is to increase the general 
cost of our product, and to reduce its exchangeable value ; hence 
it follows that the general rate of wages is lower than it would 
otherwise be, and is also subject to unnecessary fluctuations. 

Under the present complex and onerous tariff, which discrimi- 
nates in many ways against our domestic manufactures, a larger 
proportion of those who are occupied in them are subject to 
foreign competition than would be the case under a well-adjusted 
tariff. 

If all the materials which enter into the processes of domestic 
industry, commonly called raw materials, were free of duty, as 
well as finished products which are necessary thereto, such as 
chemicals, drugs, and dyestuffs, the number of persons who 
could be subjected to foreign competition, by way of importa- 
tions of manufactured products of like kind, would not exceed 
about 500,000, to whom may be added not over 200,000 in agri- 
culture, mining, and metallurgy. Such a policy would, on the other 
hand, greatly promote the export of manufactures as well as of the 
products of agriculture, and in this way would increase the general 
rate of wages by widening the market, and thereby enabling the 



324 WHAT MAKES 

country to obtain a larger sum of money for its excess of produc- 
tion. The interest of every machine-using nation, in which wages 
are naturally high, is to get the benefit of the cheapness of its 
highly paid labor by opening the widest market by the exchange 
of its goods for products made under less advantageous conditions, 
and, therefore, at low rates of wages. 

This benefit can only be fully attained when industry is 
untaxed. 

Duties upon finished goods which are ready for final consump- 
tion rest upon an entirely different basis. They may be so im- 
posed as to yield a large revenue without any material obstruction 
to industry beyond the amount of the revenue itself, and it is in 
this adjustment of duties and taxes that the most careful dis- 
crimination is required ; but this branch of the subject is foreign 
to the purpose of this treatise. 

The conditions of industry in the United States are very differ- 
ent from those of almost any other country, because there is no 
article necessary to subsistence which we cannot produce in ample 
measure, if we choose to do so. In making this statement, tea 
and coffee are placed among the comforts rather than the necessi- 
ties of life ; aside from these we could produce every thing of any 
considerable importance. It may be great folly to undertake to do 
so, because the conditions under which sugar, iron, jute, and many 
other crude articles are produced are very arduous and undesir- 
able, and in some cases unwholesome. When such articles can 
be procured by exchange at a lower cost than by their domestic 
production, the advantage lies with the country which is not" 
compelled to do such work. The same rule holds true with 
respect to many articles of a high grade in which the labor is 
mostly ill-paid hand labor. We cannot afford to spend our time 
on such work when the very poor and ignorant of other countries 
can do it so well for us, and can do nothing else for themselves. 

Hence it follows that the measure of our imports and exports 
is rather the out-come of our abundance, while in Great Britain it 
is the measure of her necessity, since her people could not be 
subsisted except for her commerce with other lands. 



THE RATE OF WAGES? %lt^ 

The obstructions which we have interposed to the import of 
materials which enter into the processes of domestic industry, 
such as coal, iron, salt, hemp, jute, chemicals, dyestuffs, timber, 
etc., give a great protection to the manufacturers of Great Britain 
so long as these duties keep the prices higher in this country than 
there. It matters not what the absolute price may be, whether 
high or low, so long as there is an artificial difference against us, 
we lose the benefit of our more effective labor and give this bene- 
fit to Great Britain, her labor being more effective and her wages 
higher than any other competitor on the continent of Europe. It 
is not to be wondered at that Great Britain views with alarm any 
change of policy in the United States which will bring us into 
direct competition with her in her foreign markets. 

The productive power of this country can be more adequately 
proved by an analysis of the work of a single State. 

The State of Ohio has been taken as an example more than once 
in the course of these treatises. It lies midway between the East and 
the West, and far enough North to be in the temperate zone, most 
conducive to success in manufacturing enterprises. It possesses 
great resources, both in respect to agriculture, mining, and manu- 
facturing. Disregarding fractions, the proportions of its popula- 
tions who were engaged in gainful occupations were as follows : 

Total number in all occupations, 994,475, or one in each 3.21 
persons, against an average one to 2.90 in the whole country. 

Of this number of persons there were engaged in agriculture, 
397,495 ; in professional and personal service, 250,371 ; in manu- 
facturing, mechanical, and mining occupations, 242,294 ; in trade 
and transportation, 104,315. 

Again, disregarding fractions, the proportions were almost the 
exact average of the whole country, to wit : 40 ^ in agriculture ; 
25 ^ in professional and personal service ; 24!- fo in manufactur- 
ing, mining, and mechanical work ; io|- ^ in trade and trans- 
portation. 

If we analyze the work of these several classes, in order to de- 
termine in what measure the people of Ohio could be subjected to 



326 WHA T MAKES 

foreign competition, even including the competition of the adjoin- 
ing Dominion of Canada, the result may be somewhat surprising. 

First, with respect to agriculture. There is probably a little 
import of barley into Ohio from Canada for the purpose of 
making beer. There may be some interchange of agricultural 
products, of fruit and the like ; and perhaps a little exchange of 
Ohio spring wheat for Canada winter wheat. But there is no 
crop of any substantial importance raised in Ohio which could be 
subjected to a serious foreign competition, except wool. 

The total value of all the products of agriculture in the State 
of Ohio in the year 1883 was computed by the State Commissioner 
of Agriculture at somewhat over $184,000,000 — which would be 
substantially at the average rate of product to each person occu- 
pied in agriculture which has been assumed throughout this 
treatise, /. e., a little over $400 per year. 

The wool clip of the present year is computed at 24,000,000 lbs., 
worth about ^7,000,000, or about 4 ^ of the whole product of 
agriculture. At this ratio, assuming that each person raising wool 
did nothing else, the proportion of those who are engaged in agri- 
culture who depend upon wool for their subsistence would be not 
over i6,oco in number. 

In point of fact a few sheep are kept by many farmers, and 
very few persons, except the breeders of high-priced rams for 
breeding purposes, depend in any large measure upon sheep- 
growing or the wool clip. 

In its place Ohio wool is about the best of its kind, and it 
could not probably be displaced by any possible importation from 
any other country ; but, assuming that it were thus displaced, it 
would affect the employment of the people in the proportion of 
one person in twenty-five of all who were occupied in agriculture, 
or of one person in sixty-two of all who were occupied in all em- 
ployments, assuming that it were their sole occupation. 

The persons engaged in professional and personal service and 
in trade and transportation in Ohio cannot, of course, be sub- 
jected to foreign competition. 



THE RATE OF WAGES? 327 

We may therefore consider manufacturing, mining, and the 
mechanic arts by themselves. 

In the census year, the entire number of persons engaged in 
the production of iron and steel within the limits of the State of 
Ohio, was a little under 20,000, or two per cent, of all who were 
occupied in gainful occupations. A few other branches of indus- 
try might be subjected to foreign competition, but the whole 
number in all branches of mining, mechanical work, and manufac- 
turing could not exceed 25,000. How many of these could be 
absolutely displaced only time and experience could prove. But 
assuming that the occupation of this whole number were of ne- 
cessity altered by foreign competition, it could only happen for 
the reason that the people of Ohio could procure more iron, steel, 
and glass from some other country by an exchange of products 
therefor ; it would follow of necessity that by so much as these 
arts were given up, some other arts would be undertaken, because 
the people must have iron, steel, glass, and other like commodities, 
whether produced by themselves or by foreigners. If they did 
not produce these articles themselves they must produce some- 
thing to exchange for them. 

Summing up all products of agriculture and all products of 
mining or manufacturing which can be imported into Ohio from 
a foreign country, we find that foreign competition would be lim- 
ited to less than 4 to 5 ^ of all engaged in gainful occupations, 
while the other 95 to 96 ^ live and work within the State of Ohio 
because there is no other place in which, in their judgment or in 
fact, their work can be done so advantageously to themselves. 

Reference may be made to the details of the occupations of the 
people of Ohio in the preceding treatise. 

But more significant are the details of the occupations of the 
State of Pennsylvania, whose people resist the remission of taxes 
on the materials which are most necessary in all arts, industries, 
and occupations, whether of agriculture, the mechanic arts, or 
manufacturing, more urgently than the people of any other State. 



328 



WHA T MAKES 



OCCUPATIONS IN PENNSYLVANIA, 1886. 



Agriculture .... 
Professional and Personal Service 
Trade and Transportation 
Apprentices .... 
Bakers ..... 
Blacksmiths 

Bookbinders .... 
Boot and Shoe Makers . 
Brewers .... 

Brick and Stone Masons 
Brick and Tile Makers . 
Butchers .... 
Cabinet-Makers and Upholsterers 
Carpenters and Joiners . 
Carriage, Car, and Wagon Makers 
Cigar Makers and Tobacco Workers 
Coopers ..... 



Engineers and Firemen 
Fish and Oysters .... 
Gold and Silver and Jewellers 
Harness, Saddle, and Trunk Makers 
Leather Curriers, etc. . 
Lumbermen, etc. .... 
Machinists ..... 

Millers 

Painters and Vamishers 
Plumbers and Gas-Fitters 
Printers ..... 

Saw-Mill Operatives 
Tailors, Dressmakers, and Milliners 
Tinners ..... 

Wheelwrights .... 
Miscellaneous arts, each small in number 

Substantially exempt from foreign competition 

Subject in part to the competition of a product of like 

kind, which could be imported from a foreign 

country : 

Clerks and Book-Keepers, Manf'g Co's . , 

Cotton, Woollen, and Silk Mill Operatives , . 



907 
,025 
276 
055 
634 
504 
210 
504 
,200 
,866 
782 
,026 
970 
,8-52 
452 
598 
204 
729 
020 
085 
601 
902 
008 
621 

877 
619 
851 
264 
381 
561 



301,112 
446,713 
179.965 



357.584 
1,285.374 



1,668 
44.746 



THE RATE OF WAGES? 329 

Employes, Manf g Go's not specified .... 3i995 

Iron and Steel Workers ...... 33,628 

Manufacturers and Officials, Manf'g Go's . . . 6,740 

Mill and Factory Operatives, not specified . . . 6,701 

Miners 69,415 

Paper Mill Operatives 2,176 

Ship Glarpenters, etc. . . . . . . . 1,624 170,693 

Total 1,456,067 

In the foregoing classification it may be admitted that a small 
portion of those who are listed as blacksmiths, carpenters, and 
who are engaged in transportation, and in the miscellaneous list 
covering glass, chemicals, etc., should be added to the list of 
persons subject in part to foreign competition ; but on the other 
side all clerks, etc., of manufacturing companies, all manufac- 
turers, mill and factory operatives not specified, and officials of 
manufacturing companies have been placed in the list of those 
who are subject in part to foreign competition. Foreign compe- 
tition is therefore narrowed down to about 150,000 persons en- 
gaged in mining, metallurgy, textiles, paper, glass, and chemicals. 

The proportion of miners engaged on iron ore and coal for 
blast furnaces is less than one half the whole number. A large 
portion of the cotton and woollen fabrics are coarse goods which 
can be made here at a lower cost than in Europe, and a large por- 
tion of the iron and steel workers would have more work rather 
than less, if iron ores, pig-iron, and ingot steel were free of duty 
or tax. 

It would be difficult to prove that more than one half the list 
of those whose industry might be subject in part to foreign 
competition would be for a time adversely affected, even if a 
policy exempting the materials which enter into the processes 
of domestic industry from duties was adopted, such as pig-iron, 
coal, wool, timber, chemicals, salt, and the like, while all other 
arts would be promoted. One half would number 85,000 or less 
than six per cent, of the whole number of persons occupied in 
all gainful occupations in this State. 



330 ~ WHAT MAKES 

It therefore follows that so long as a tax is continued upon the 
import of a foreign article which is needed in the processes of 
domestic industry, by which the price of that article, however low 
it may be, is yet kept higher than it is in Europe, the manufactur- 
ers of this country are kept at a relative disadvantage, and per- 
haps no art suffers so much from this cause as the art of ship- 
building on the Delaware River in Pennsylvania itself. 

It indicates a singular delusion when out of 1,456,067 persons 
occupied in all gainful employments in the State of Pennsylvania 
in the census year, not over 30,000 to 35,000 were employed in 
mining iron ore, in mining coal for blast furnaces, and in the con- 
version of these materials into pig-iron. It should yet appear 
from the public utterances of the public men of this State, as if 
the people were incapable of sustaining themselves if this undesir- 
able occupation were not specially promoted. 

Pennsylvania possesses agricultural resources unequalled in 
this country, timber, oil, fuel, power, great navigable rivers, and 
every other advantage which nature can give her ; but yet subjects 
them all to a grave disadvantage in order to attempt to sustain, 
by purely artificial and obstructive methods, a branch of work 
which is not desirable in itself in its necessary conditions, and 
which is now being subjected to a destructive domestic competi- 
tion, perhaps prematurely forced into action by the very policy 
which she herself has insisted upon. 

Although it is not the purpose of this treatise to enter into the 
general discussion of the question of taxation, yet it has become 
apparent that no treatise upon the forces which make the rate of 
wages can be considered complete which does not take cognizance 
of the taxation imposed upon coal, wool, timber, and pig-iron, 
whereby this country is placed at a relative disadvantage com- 
pared to almost all others. 

Such taxes upon the very sources and foundations of industry 
cannot fail to reduce the rate of wages by restricting the sale of 
our products of other kinds while at the same time increasing 
their cost. 



THE RA TE OF WA GES ? 331 

No determination of other questions is possible until the power 
of the representatives of pig-iron, wool, and silver to dictate the 
policy of both political parties is taken away, nor until their influ- 
ence is reduced to the measure of their importance. Their 
relative importance is easily measured by a very commonplace 
standard. 

Their gross annual value is now at the maximum less than 
$200,000,000, or less than two per cent, of our annual product. 

Each one taken by itself represents a less product than the pro- 
duct of eggs from the hen yards of the country, and the three 
together barely equal in value the product of eggs and poultry 
combined. 

So long as their domination, is submitted to, the adjustment of 
the tariff is impossible. No advocate of free trade can ask a 
heavy reduction of duties on fabrics which are ready for final con- 
sumption, when the materials of which they are composed are sub- 
ject to excessive duties ; and no advocate of the protective policy 
can make even a reasonable concession so long as manufacturers 
of iron, steel, woollens, worsteds, and other fabrics are subjected to 
such a burden as the present tax on materials. No determination 
can be reached as to what is the true or possible maximum rate of 
wages in this country so long as all our workmen are placed at 
such a disadvantage as is imposed upon them by heavy taxes on 
the most necessary articles which enter into the processes of their 
industry. 

Entirely aside from these temporary questions of currency and 
taxation, we may again question the table of occupations to see 
why the average production is so small as 50 to 55 cents per day 
per capita, or $1.45 to $1.60 per day to each person occupied in 
gainful work ; and also why, small as it is, it is so unequally dis- 
tributed. 

What has this inequality to do with the alleged monopoly of 
land by private owners which is said to exist by Henry George 
and other sincere reformers of the same school. 

For this purpose we may limit our consideration to the United 



33^ tVITAT MAKES 

States, where the purchase and sale of land has been made more 
simple and free from legal obstruction than in any other country, 
except some of the colonies of Australia where there is reason to 
suppose that even a better and more simple mode of sale and 
transfer of land exists than with us. The fault, if any, in the 
system of private ownership cannot be determined by a study of the 
condition of Ireland, — a small island which is still subject to the 
disabilities caused by despoiling private owners under the alleged 
right of conquest long years since ; nor by a study of English 
land, burthened as it is by rights of dower, settlements, and entails 
to such an extent that actual ownership of the larger part of the 
soil has practically ceased to exist, most of it being held under a 
life estate only ; nor by a study of the conditions of most of the 
continental states of Europe, where compulsory subdivision of land 
has in great measure prevented the wide application of capital 
to its most productive use. 

In this country a very large portion of the soil has been and 
still is under State or National ownership ; it does not need to l;c 
Nationalized, because it is Nationalized already. It has long breii 
practically free and open to homesteaders, preemptors, squatters, 
graziers, ranchers, and the like, and all. our efforts have been to 
get it into private ownership or occupancy, in order that it might 
be put to productive use. 

Even a large portion of the land held in private ownership has 
been and is practically open to occupation and use at so small a 
price as to be substantially free land. A large portion of the 
mountain section of the South, unequalled in its potentiality for 
production, or in natural conditions favorable to health and in- 
dustry, has been and may still be purchasable at from twenty 
cents to two dollars per acre in fee simple. 

It follows that if there is want in the midst of abundance, and 
if the poor of our cities are crowded into slums, it is not to be at- 
tributed to lack of free land. In fact, we waste the powers of the 
land that is in use, for the mere reason that there is so much of it 
not yet occupied for use, and this wasteful method may be de- 



THE RATE OF WAGES? 333 

fended as the most economical for the time being. Again the 
graphical method may be employed to make this matter plain. 

In the following table I have dealt in a rough and ready way 
with the areas occupied, or which might serve, for all our 
great crops. The area of the United States, omitting Alaska, is 
a trifle less than 3,000,000 square miles. 

In a broad and general way we may assume that one half this 
area is good arable land, one quarter good pasture land, and 
one quarter forest, mountain, and mining territory. 

TOTAL AREA, 

3,000,000 square miles 

Graphically shown by the four lines. 

Mountain and Timber. 
1-4 

Grazing. 
1-4 



Arable. 
1-2 



INDIAN CORN FIELD. 
112,500 square miles. 



At 25 bushels to an acre this area produces 1,800,000,000 bushels. This 
corn is largely converted into pork at the rate of 5 lbs. of corn to one pound of 
pork. Assuming one thousand million bushels thus converted, and the rest 
used for human or cattle food, the product of pork would be equal to 18,500,000 
casks or its equivalent in bacon ; which would give nearly one cask of pork of 
300 lbs. to each head of a group of three persons per year, or 100 lbs. per capita. 



334 - W>W^ T MAKES 

WHEAT FIELD. 
60,000 square miles. 

At 13 bushels per acre this little area yields a little over 500,000,000 bushels. 
Setting aside an ample portion for seed this quantity would give over 80,000,000 
persons one barrel of flour per year. 

COTTON FIELD. 
20,000 square miles. 

B 

At the wretched average of only half a bale to an acre this little patch yields 
6,400,000 bales in a year. 

WOOL. 

What the actual area of sheep pasturage is no man can tell, 
because the area of land absolutely free to graziers and ranchers is 
so large that no question of area has arisen until within a very 
short time ; but the end of this wasteful and archaic method can 
be foreseen. When the cur-dog shall have been muzzled, or when 
dogs shall have been declared ferce 7iaturce, it will be easily possi- 
ble to sustain four sheep to an acre over wide areas of unoccupied 
land in the East and South as well as in the far West ; this would 
require a sheepfold of 

40,000 sq. miles, 

sustaining 102,400,000 sheep, which at only 4 lbs. each would yield more wool 
than we now consume of all kinds both domestic and foreign, 

DAIRY FARMS AND HEN YARDS, 

In 1880 the number of milch cows was estimated at 12,500,000, 
and the product of eggs was computed at 500,000,000 dozen, 
valued at ^80,000,000. Over how wide a range of pasturage the 
milch cows ranged it is impossible to say, but almost within the 
period which has elapsed since 1880 it has been proved entirely 
possible to feed two cows one year on the corn-stalks saved in 
pits which can be raised on one acre of fairly good land, if to 
this green fodder be added a ration of meal made from the cotton 



THE RATE OF WAGES? 335 

seed which was almost all wasted until a very recent time and is 
yet saved in only a very small proportion. But in order to be 
safe we may reverse this ratio, and assigning only one cow to two 
acres we may greatly increase our present ration of milk, butter, 
and cheese, with the hens' eggs thrown in. 

A Dairy Farm and Hen Yard 
of 60,000 square miles, 

at I cow to 2 acres, will sustain 19,200,000 cows. 
BEEF. 

The relative importance of meat in the subsistence of our 
people has been shown in the foregoing table. A large portion 
of our beef is now produced by almost semi-barbarous methods 
on the far-distant plains ; but as population increases this rude way 
must give place to more civilized and humane modes, and our 
beef must be produced near its place of consumption. Many 
Eastern farms which had ceased to be profitable have lately been 
converted into beef factories, upon which steers are raised and 
fattened on ensilage and corn-meal. Provision has been made for 
the cornfield, and if pitted forage is as fully justified on a broad 
scale as it has been in the successful experiments of many able 
men who have applied brains and capital to the use of land, it 
would be necessary to assign only a small area to beef. 

60,000 square miles, 
^^ 
at 500 lbs. of meat to an acre, would yield nearly one pound of beef per day 
to our present population (reckoning two children as one adult). 

If these propositions can be sustained, it follows that our pres- 
ent crops of corn, wheat, and cotton, and a very much increased 
product of the dairy and poultry-yard, as well as of meat and 
wool, can be raised on 

352,500 square miles, 

or upon twelve per cent, of the total area ; and even this assign- 
ment of land is nearly double what might be required if the 



336 WHAT MAKES 

intensive system of farming were adopted by men of sufificient 
intelligence and capital to conduct all parts of the work in a 
reasonably good way. 

It is held that in the face of this demonstration the charge that 
poverty is now to be attributed to monopoly of land in this country 
is utterly disproved, and that the explanation of extreme poverty 
must be sought in other directions. It is painfully apparent that 
extreme poverty is to be found chiefly among those who are 
foreign born, but there is as much free land open to them as 
there is to the native born — enough and to spare for both. 

It may therefore well be questioned whether the more intense 
and widespread poverty of European countries can be attributed 
mainly, even if in part, to the systems of land tenure there pre- 
vailing, if the same phenomena are to be found in the heart of the 
great cities of this country where there is so much free land as in 
those of countries where land is fully occupied. 

Want oppresses New York, Boston, and Philadelphia, of the 
same kind if not in as great a degree as London, Paris, and Berlin. 
Yet in the United States land is in excess of the utmost need ; in 
England it is held by the few rather than the many, and in France 
and Germany by the many rather than by the few. It follows, 
almost as a matter of necessary deduction from these phenomena, 
that the great problem is the distribution of the product of the soil 
rather than the distribution of the soil itself. The greater part 
of those who only suffer in cities might starve if removed therefrom 
and placed upon unoccupied land where they would depend only 
upon themselves for subsistence. 

What other reason can there be for the very poor to gravitate to 
the cities, if the struggle to obtain food and shelter is not a little 
less severe there than it would be in the country ? 

In order that material welfare may exist at all, labor and capital 
must both be applied to land. Land is valueless without labor — 
labor is almost helpless without capital. Is not this the reason 
why the unemployed flock to the cities where the capital is, and 
never go to the free land unless moved tliere and sustained by the 



THE RATE OF WAGES? '337 

capital of others until they can possess land and capital of their 
own ? 

I have endeavored to show the function of capital when invested 
in the mechanism of production and distribution. We may now 
measure the results of its application and attempt to mark the 
point which we have reached in our progress toward general welfare. 

In the consideration of the following table it must be remem- 
bered : 

First, That the money-cost of food and drink is probably 
more than this table gives, because the average working-man buys 
at retail on less advantageous terms than are obtained by the 
managers of factory boarding-houses, who buy food at wholesale. 

Second. That the estimated consumption of textiles in the 
form of clothing, carpets, laces, embroideries, and all other forms, 
is a maximum estimate. 

Third. That the estimated cost of shelter for the increase of 
population is an approximate one only, for which there are but 
few actual data known. 

Proportionate expenditure of the people of the United States 
in 1884 for food, drink, and clothing, and for additional 
shelter for the increase of population. 

I. Food, at the average ration of factory operatives in New^ Eng- 
land and the Middle States ...... $4,340,500,000 

Drink, as recently computed by David A. Wells . . . 474,823,000 



Total $4,815,323,000 

2. Clothing ready for use, carpets, blankets, laces, and all other 

textile fabrics on the basis of the domestic production and 
import of the census year with the cost of conversion and 
distribution added ........ $1,500,000,000 

3. Shelter for an increase of 2,000,000 on the basis of a dwell- 

ing or part of a dwelling for each family of five, costing 

$500 $200,000,000 

There are no available data for ascertaining the cost of keeping 
dwellings in repair or of maintaining existing shelter by the sub- 
stitution of new for old ; but from all the statistics attainable it 



338 WHAT MAKES 

may be fairly computed that the total value of all the dwellings 
in existence at this time, or at a given time, for the use and occu- 
pancy of all the wage-earners and small farmers of the country, 
would be little, if any more than the annual market value, at the 
place of consumption, of the food and drink consumed by them. 

In other words, in the foregoing tables I have based all the 
figures on a population of 57,000,000, equal in consuming power to 
50,000,000 adults. In such a population there would be substan- 
tially 19,650,000 persons occupied in all gainful occupations, of 
whom over 18,000,000 would be wage-earners or small farmers, 
representing at least nine tenths of the actual consumption of the 
country and sustaining 52,500,000 of the population. If the 
shelter of each one of these persons is worth ^100, the value of 
working-men's dwellings would be $5,200,000,000, or but little 
more than the estimated annual cost of food and drink. 

Assuming 5 per cent, per annum for repairs and maintenance, 
we get $260,000,000, which being added to the computed cost of 
new dwellings, gives the proportion of the cost of working-men's 
shelter as compared to the cost of food and clothing. How much 
should be added for rent paid by those who do not own their 
dwellings would not form a part of this branch of the subject. 

What I wish to bring out is this : Out of an estimated product 
of the present population, at the same ratio as that used in 
the treatise on wages — to wit, $11,400,000,000 in 1885 against 
$10,000,000,000 in the census year, 

Food and drink take up, at the minimum, about . . . $5,000,000,000 

Clothing, etc., at the maximum ...... 1,500,000,000 

Repairs, maintenance, and construction of dwellings for work- 
ing people ......... 460,000,000 

Repairs and construction of dwellings for the well-to-do at 

double rates ......... 40,000,000 

Accounted for . . . $7,000,000,000 

Leaving $4,400,000,000 to be accounted for in the consumption of 
all other articles aside from food, drink, clothing, and shelter. Out 



TFIE RATE OF WAGES? 339 

of the distribution of this remainder would come the luxuries of 
the rich, — the comforts of the well-to-do, and all our additions to 
capital and to the savings of the people. 

But in this analysis it will be observed that the proportion of the 
total expenditure assigned to food is far short of that which is the 
well-ascertained proportion in workmen's families both in this 
country and in Europe, which is fifty per cent, of their income 
in respect to the better class, and sixty per cent, in the lower 
grade. At fifty per cent, of our estimated gross income, food and 
drink costs $5,700,000,000. 

What, then, is the conclusion ? Is it not that even in this sparsely 
populated land, of almost unlimited potentiality in its production of 
grain and meat, more than one half the struggle for life is still a 
mere struggle for food ? Can this low plane of mere existence, 
which many fail even to atta'in, be attributed to monopoly of land ? 
to institutions established by law ? or to causes wholly remediable 
by legislation ? If not, wherein do we fail, in spite of our much- 
vaunted civilization ? 

Again, we must refer to the table of occupations, and in the sort- 
ing of all according to their work are we not compelled to admit 
that a miserably small proportion have become individually capable 
of making adequate use of the vast resources which have been 
placed at our disposal ? With no lack of land, of capital, of 
education, or of opportunity, why is it that more than one half of 
every thousand who are occupied should be found in the position 
of small farmers working harder than their hired men ; or in that. 
of laborers, domestic servants, waiters, and the like ? Is not the 
only remedy to be found in the slow development of individual 
capacity while the drudgery can only be alleviated by the rapid 
and safe application of capital ? 

The wretched hypothesis of Malthus has no place here — neither 
has it been historically sustained anywhere. Modern sanitary 
science has curbed the pestilence ; famines have become sporadic 
and of little general effect ; war has reduced production in vastly 
greater measure than it has checked population, 



340 WHAT MAKES 

In the light of modern science and experience, a rule might be 
substituted for this atheistic hypothesis which may be formulated 
as follows : 

Savage man, or even semi-civilized man, while still subjected to the 
burthen of standing armies and of passive war, tends to increase 
faster than the means of subsistoice can be supplied j under such con- 
ditions, pestilence or famine may afford a necessary relief. But 
civilized man, freed from semi-barbarous conditions, and dwelling in 
peace, proindes means of subsistence in far greater measure than is 
required by increase in numbers. 

Yet, although what may be called the higher laws which make 
for abundance have only yet been applied in very limited degree, 
there has not been a decade since the so-called law of population 
of Malthus was first propounded in which it has not been disproved 
by a much greater increase in the world's means of subsistence 
than in the population ; subject, of course, to isolated cases where 
there has been what may be called an artificial congestion of igno- 
rant human beings capable only of being scattered by hunger, as 
in Ireland in 1846. 

Neither has the Ricardian theory of rent nor the opposite 
theory of Henry C. Carey found any sustaining facts in this coun- 
try ; but a very different formula would be required here. It 
might be put somewhat in this form : 

Rent is the tribute which valueless land renders in proportion to 
the intelligence, capital, and industry which are applied to its culti- 
vation, use, or occupancy. 

If land is devoted to agriculture, the rent which will accrue to 
the owner who cultivates it himself, or which can be paid by the 
tenant, will be the produce which is returned by the soil over and 
above the force expended upon it — which force may consist of 
labor and capital in varying proportions. The force expended on 
originally fertile land may be almost wholly labor — upon poorer 
land it may be almost wholly capital ; the measure in terms of 
money of these two forces may be the same and the value of the 
product may be the same, while the intrinsic properties or fertility 
of the soil may have been very different. 



THE RATE OF WAGES? 34I 

If land is occupied for other purposes, rent will be the measure 
of the advantage of position, or of the efficiency of the capital 
which is used upon it. 

The theory of Ricardo, in the judgment of the writer, is based 
upon the idea that the soil is a mine, while in fact, it is now treated 
more as a laboratory ; hence farming has become rather a matter 
of brains than of muscle. Intelligence and capital rather than 
labor are now the principal factors in successful agriculture. 

It is not, however, my purpose to deal with the views of 
somewhat insular economists like Malthus and Ricardo, to whom 
the forces of the railway, the steamship, and of modern chemistry 
were alike unknown ; nor with those of doctrinaires like Carey, 
who dwarfed a really observant mind to the petty measure of a 
purely selfish policy in respect to foreign commerce. 

The single question presented to us is this : Have we yet 
any statistical or historical bases by means of which we can 
solve the apparently simple problem of 

WHAT MAKES THE RATE OF WAGES ? 

If no fully affirmative reply can yet be given, still great progress is 
being made. The science of census-taking has been developed in 
admirable measure by Walker, Wright, and their efficient assistants 
and coadjutors. Bureaux of the statistics of labor are doing most 
excellent work in several States and will soon be supplemented by 
the National Bureau. The work of Mr. Jos. Nimmo, Jr. in the 
Government Bureau of Statistics leaves little to be desired ; while 
the State Reports of Railroad Commissioners, supplemented by the 
Manual of H. V. Poor, give more information on that branch of 
distribution than can be found in any other country. 

In England great progress has been made in statistical science, 
as well as in Germany and other continental states. 

Since the first edition of this book was issued a very valuable re- 
port upon " Labor in Europe " has been issued by the State De- 
partment, It is evident that an excellent beginning has been made 



342 WHA T MAKES 

in the investigation of the co»dition of laborers in other lands, by 
American consuls. 

The volume just issued gives very full information as to the rates 
of wages, the cost of food, rents, and other matters which are of 
the utmost value : but the volume is incomplete, as are most of the 
reports of the consuls, in not giving any clue to the bearing 
of these facts upon the cost of production of the most important 
commodities in the exchange of which this country is interested. 

The volume shows conclusively the very much greater share of 
a larger product which the workmen of this country attain, whether 
measured in terms of money — /. e., in high rates of wages, — or in 
what the money will buy ; it also proves that the best conditions, 
next to this country, are attained in Great Britain, while the scale 
of wages becomes progressively lower and lower as we pass to the 
less productive countries of the continent, where longer hours, 
more arduous conditions, and heavier burthens yield less results 
in quantity of product and proportion of wages. 

Secretary Frelinghuysen's attention has evidently been called to 
the necessary extension of the work which has been so well begun 
in his department. In the conclusion of his report he says : 

" There are certain natural and artificial conditions which 
so largely affect the direct conditions of wages as to be entitled to 
consideration in any analytical examination of the great questions 
of labor ; but from their abstruseness they are less evident to the 
general mind and more debatable than the simple relations shown 
in the reports of the consuls and summarized in this letter. It 
would be a legitimate field of inquiry to ascertain what are the 
conditions which enable England to manufacture machinery and 
other products at less prices than similar goods can be manu- 
factured in France, and at prices equal to those in Germany, while 
t/ie rates of wages paid to the workmeti engaged ifi those manufactures 
in England are, on the whole, higher than those paid for similar labor 
in France, and more than double those paid in Germany ^ 

The italics are my own, and the Secretary might have added : 
" while the hours of labor are much less per day." 



THE RATE OF WAGES? 343 

It is greatly to be hoped that this excellent work of the State 
Department will be continued. It appears that a report by Consul 
Williams, of Rouen, will soon be given, in which both the rates of 
wages and the cost of labor in a locomotive engine will be given. 

It would not be difficult to frame the instructions to all consuls 
ift such a way that each might report in a similar manner on some 
given unit. 

For instance in Oldham, on the rates of wages .paid and the cost 
of labor on a pound of No. 32 cotton twist. 

In Blackburn, on the cost of labor and rates of wages in some 
described article of woven cotton fabric. 

In Yorkshire, Belgium, and Germany, on a i6-oz. cassimere. 

In Mid-Lothian, on a ton of wheat. 

In Newcastle, on a ton of coal. 

In Glasgow, on a ton of iron. 

In Germany, on a ton of " basic " steel, or steel-wire rods. 

If such reports were accompanied by samples showing the fabric, 
the mode of preparing for market, and other matters — to be 
deposited in the Smithsonian Institute, — the reports would leave 
little to be desired. From these specific statements in regard to 
certain staple articles, easily compared with our own, the relative 
cost of all other commodities could be inferred. 

For such service high attainments would be required on the 
part of consuls, which will soon be secured under a reformed civil 
service, and it is greatly to be hoped that the new administration 
will give close attention to this most important subject and extend 
the scope of the work so well begun by the present Secretary. 

Since I cannot at present rewrite and thus avoid the repetitions 
which occur in this volume, it may be well to give the following 
condensed statement of each of the several conclusions to which I 
have been led, and which I have endeavored to present and to 
sustain in the different parts of this treatise. 

ist. — Competition brings into action the most effective system 
of co-operation among men, and in their final results the two 
words may be considered synonymous. 



344 WHAT MAKES 

2d. — By means of competition the relative share of the product 
of any given country secured by capital is diminished, while the 
share of the laborer is increased both absolutely and relatively. 

3d. — By means of competition substantial equality in the con- 
sumption of the necessaries of life may be attained. As time goes 
on and abundance increases, the luxuries or comforts of one* 
generation become the necessities and are enjoyed by those which 
succeed. 

4th. — Wages are a consequence or result, and are not a measure 
of the cost of labor. The better the conditions under which the 
work is done, the less the cost of a given product measured in 
terms of labor, and the greater the result or wage measured in 
terms of money or of what money will buy. 

5th. — Civilized man, living under peaceful conditions, increases 
the means of subsistence by the application of intelligence and skill 
to all production in a greater ratio than population tends to increase. 

6th. — Rent is a tribute rendered by valueless land in propor- 
tion to the intelligence, industry, and capital which may be 
applied to its cultivation, use, or occupancy. 

7th. — The burden of general taxation is to be measured by the 
ratio which the sum of all taxes bears to the net income or savings 
of the people, rather than by its ratio to the gross product. 

8th. — The burthen of a special tax on any given commodity, 
either foreign or domestic, will be severe or of little moment, ac- 
cording to the subject on which it is imposed. When placed upon 
an article which enters into the processes of domestic industry, it 
becomes a great obstruction ; when placed upon an article of vol- 
untary use ready for final consumption, the burden may be small 
even though the revenue be large, and it is then in exact propor- 
tion to the amount of the tax. 

9th. — Capital is a force to be applied rather than a substance 
to be divided. It employs labor and is employed by it — both 
co-operating of necessity, and not from choice. It follows that 
the dollars of the fortunes gained in wholesome pursuits are the 
ireasure of the services which the owners have rendered to society. 



THE RATE OF WAGES? 345 

loth. — No acts of legal tender can make two metals circulate 
permanently at equal values, no matter what adjustments in the 
weight of coins may be made from time to time. If domestic 
commerce were not subject to an act of legal tender, it would be 
conducted on the same basis as that on which foreign commerce 
is now carried on — namely, by the standard of a given weight 
of gold. 

nth. — The general rate of wages which can be paid in money 
is made or determined by the sum of money for which the general 
product can be sold ; the less obstruction there is to commerce, 
either domestic or foreign, the more the general product will 
bring, the higher the rate of wages will be and the greater the pur- 
chasing power of each unit of the wages. Within this limit the rate 
of wages of each individual is made by himself, and is in the exact 
ratio of the service which he is capable of rendering to others ; it 
depends upon character, capacity, and industry. 

i2lh. — Insufficient as the product of the United States is com- 
pared to what it might be, yet being the result of the cheapest 
and most effective application of labor and capital yet attained, 
and being also most free from the burden of destructive taxation, 
it yields to skill and intelligence the highest rates of wages and 
the most adequate profits as the necessary result of low cost of pro- 
duction. 

Some exceptions have been taken to the propositions submitted 
in this treatise, while the value of the statistics has been 
accepted. 

It has been said, in one of the most carefully written criticisms, 
that the so-called law of population propounded by Malthus has 
been ignored but not disproved. Upon this point no argument 
will be made ; the purpose of the treatise is to present facts and 
to try to comprehend their meaning. It appears to be a fact, that 
in this country and in England, during the present century, 
laborers, as a class, have gained an increasing share of an in- 
creasing product ; whether such product be considered in ratio 
to the capital or to the number of laborers engaged upon it. If 



346 WHAT MAKES 

this be true, then the so-called law of population of Malthus, and 
the hypothesis that population tends to increase faster than 
the means of subsistence, are either disproved, or else have been 
subject to an exception or variation in these two countries, lasting 
through the whole period since the so-called law was first pro- 
pounded. 

It has also been held that in the distribution of products, 
whatever the annual product may be, the writer has left no place 
for rent. It will probably add to the doubt of the capacity of the 
writer to deal with any thing but statistics, if he expresses a doubt 
of the existence of rent in the sense in which that word is used by 
Ricardo and by the later economists of the English school. So 
far as he has been able to comprehend this theory, it is based 
mainly upon the varying properties of the soil, subject to modifi- 
cation according to position and to the facilities for marketing its 
products. 

Are there not other modifications or exceptions so numerous as 
to destroy the apparent rule ? Two pieces of land of the same 
fertility, and, in other respects, each equal to the other, may be so 
treated that one will yield a large product above the cost of pro- 
duction — that is, will yield rent ; while the other will barely yield 
the cost of production — that is, no rent. 

Or the two pieces of land will each yield a large and equal 
rent ; in the one case, being cultivated with the maximum of 
labor and the minimum of capital ; in the other, with the maximum 
of capital and the minimum of labor. 

In neither case do the properties of the soil constitute the 
measure of the rent. 

Is not the rent or income which the soil yields in the long run, 
over and above the cost of production, chiefly a matter of mental 
capacity on the part of him who directs its cultivation rather than 
of its original properties or fertility ? 

If such be the case, the rents which are attained by virtue of 
mere possession, and which are claimed by the landlord from the 
tenant, may not be considered a permanent factor in the disr 



THE RATE OF WAGES? ^ 34/ 

tribution of products. The possession of land in England remains 
the same as it has been, but rents are ceasing to be paid, because 
the application of science to the mechanism of distribution has 
almost destroyed the advantage of position of English land. 
Hence, it may happen, in the course of time, that even Eng- 
lish land cannot be made a source of income or rent except 
to him who applies intelligence and capital directly to its use. In 
such case, land may be held to be of the same nature as all other 
instruments of production — that is, as a laboratory which yields 
product in the exact measure in which capital and labor co- 
operate in its cultivation. In such case, it may also be asked how 
rent will differ from any other profit. 

Holding this view of the matter, the writer has, therefore, 
avoided reference to the customary terms used in the distribution 
of products, and has confined his terms to two shares only, — 
one share being assigned to the increase of capital, the other to 
labor. 

But even if the share assigned to the increase of capital be 
divided in the customary way and named in part rent, in part 
interest, and in part profit, the change in name does not alter the 
general question. 

Is it or is it not true that, as time goes on, the absolute share 
of the annual product set aside for rent, interest, or profit increases 
absolutely while it decreases relatively ? 

Is it or is it not true that the share set aside, assigned to, or 
earned by labor, according to the common use of that word, is 
becoming an increasing share of an increasing product ; in other 
words, is the share of the laborer increasing both absolutely and 
relatively ? 

So far as the data are to be found, the writer believes in 
progress yr(?;;z poverty, rather than in the assumption of want of 
equity in the existing system of distribution, which is implied in 
the phrase " progress ^^aT poverty." 

In this treatise he has made use of the insufficient data within 
his reach, only with the view of giving a direction to an investiga- 



348 THE RATE OF WAGES. 

tion now admitted to be necessary to the solution of these ques- 
tions. Witness the increasing importance of, and interest in, the 
taking of the census, and the establishment of National and State 
inquiries as to the conditions of labor. 

Is there, or is there not, an order in the relations of men to each 
other, which, when reduced to terms, will constitute the elements 
of Social Science ? If there is, then the historical and statistical 
method is the only one fit to be adopted, and the a priori con- 
cepts of many of the accepted economic writers must yield again 
to the methods of Adam Smith, extended over the wider ground 
which is now open to him who is capable of occupying it. 

To one who has faith, not only in " a power that makes for 
righteousness," but for human welfare upon this earth as well, 
the study of these complex problems of modern life may become 
an absorbing pursuit, no matter how inadequately he may be able 
to treat them. 

In conclusion, the writer may venture to express his gratification 
with the fact that a second edition of this somewhat disjointed 
series of economic studies has been called for. He may well be 
satisfied with the approval indicated by many letters from men of 
high position, as well as of economists and students of social 
science ; yet the greater satisfaction has consisted in the endorse- 
ment of many persons, who, like himself, have been compelled to 
observe the relations of labor and capital, and to study the forces 
which make the rate of wages, in the conduct of practical affairs 
and in the manufacture of goods of many kinds. 

There may perhaps be no true or final and satisfactory solution 
of these complex problems until the members of the unlearned 
professions of the merchant, the manufacturer, or the underwriter 
compile the data from their own practical experience for the use 
of the members of the learned professions who write the books 
upon social science or teach political economy in the school or in 
the university. The one may, perhaps, perform the labor, while 
the other may furnish the mental capital, and from the co-opera- 
tion of the two the best results may be attained. 

Brookli?ie^ Feb. 23, 1885. Edward Atkinson. 



SUGGESTIONS TO STATISTICIANS. 



In the progress of this work the attention of the writer has been 
called to the great dearth of what may be called comparative sta- 
tistics, corresponding to the fifty years' history of cotton factories 
in all departments : and also to the lack of consecutive statements 
of the simplest factors in subsistence, like the four years' account 
of the cost of food for factory operatives. If there are in print 
statements corresponding to these, the writer would be under a 
great obligation to any reader who would call his attention to 
them. 

It is by the use of comparative statistics that the relative con- 
ditions of working people may be demonstrated, and having ven- 
tured to suggest certain methods for rendering our consular re- 
ports more complete, a plan is now submitted for comparisons of 
the condition of laborers at home. 

The customary method of treating only the rates of wages and 
the prices of food, clothing, and rent, is inconclusive, because the 
proportion of each element in the cost of living varies so much in 
quantity as well as in value. 

May we not, however, establish a standard ration, — a standard 
supply of clothing, of fuel, light, and incidentals, and of rent, for 
certain specified classes of persons whose plane is substantially the 
same ? 

Working from the ration of factory operatives as given in this 
treatise and from other data, the expenditure might be calculated 
as follows : of a mechanic in Massachusetts earning $550 to $600 
per year, and spending for the necessaries of life $500 per year 
in supporting a wife and two children, the latter counted as equal 
to one adult — /. ^., a group of three adults corresponding in a measure 
to the working group of three as shown to exist by the census : 

349 



350 



IVHA T MAKES 



PRO FORMA. 



Meat, \ lb. fresh to i lb. salt, per day, per adult (two 
children to one adult), gi cents each per day 

Dairy products, \ pint milk, i^ oz. to 2 oz. butter, 
and a scrap of cheese at a fraction under 5 cents 
per day per adult ...... 

Bread, i to f lb. each, at a fraction over i\ cents per 
day per adult ....... 

Vegetables, more than one half potatoes, a little over 
2 cents each per day ...... 

Sugar and syrup, a little less than 2 cents each per day 

Tea and coffee, i cent each per day . 

Eggs, \ cent each per day .... 

Fruit, green and dry, \ cent each per day 

Salt, spice, ice, pickles, etc., + cent each per day 



Total food 



Fuel and light . 
Incidentals, soap, etc. 

Clothing, 35 % cotton 
45 ,'^ woollen 
20 % sundries 

Rent 



Total 



$28 00 
22 00 



PER YEAR. 



PER CENT. 

OF THE 

WHOLE COST 

OF LIVING. 



50 00 

30 00 

25 00 
20 00 
10 00 

5 00 
5 00 
5 00 



^250 00 

50 00 
100 00 
100 00 



;oo 00 



10 
6 

5 
4 
2 
I 
I 



50 

10 
20 
20 



100 ^ 



This table is only an approximation, and may or may not be a 
true standard, but it indicates how a very accurate standard can 
be established. It is given as being suggestive if not conclusive. 
In some sections the proportions of each element would vary in 
very considerable measure, and in the same section the propor- 
tions may vary in the city and in the country ; but would it not 
be in the power of the Chiefs of the State Bureau of Statistics to 
establish a fairly accurate standard, modelled upon this plan, in 
respect to three classes of persons in each State : 

1. Common laborers, $400 per year, income. 

2. Average mechanics, $600 per year, income. 

3. Employes of railways or the like whose incomes are about 



THE. RATE OE WAGES? 3^1 

fifty per cent, higher than those of the average mechanic, or 
$900 per year. 

Each one of these standards being established in each State 
would serve as a measure for comparing one State with another, 
and if the average in all States were compiled in one average on 
each class, a standard would be established for an accurate com- 
parison of the condition of one country as compared to another. 

Again : the relative per cent, or proportion of dollars in any 
given standard, which must be applied to each separate item in 
the cost of subsistence at the present time, being thus determined, 
a comparison could be made of the actual condition of laborers in 
the same State at a much earlier date. For instance, given a 
family of four persons living upon the total sum of the foregoing 
table, to wit, ^500, it may be assumed that the workman of the 
same class could spend only two thirds of this sum at some pre- 
vious date, say in 1840. 

Divide the two thirds, or $333.33, in the same proportions that 
the present expenditure of $500 is divided by. Apply these pro- 
portions to the purchase of food, fuel, clothing, and rent at the 
prices of 1840, and then we have an exact system for the compari- 
son of conditions which do not now exist. We should then be 
in the possession of the data of wages, prices, and proportionate 
cost of each of the elements of subsistence. 

EXAMPLE. 

Suppose wages in 1840 to have been two thirds the present 
rate. The mechanic now spending $500 per year would then 
have spent, say $340, in same proportions as he now spends, to wit : 

How much would these sums buy 
in 1840 ? 
Meat 20 % $68 00 Of beef. 

" mutton. 

" poultry. 

" salt pork. 

Dairy \o% 34 00 " milk. 

" butter. 

" cheese. 



3^2 



tVHA T MAKES 



Bread 


6% 


20 40 


How much would these sums buy 
in 1840 ? 
Of flour. 


Vegetables 

Sugar 

Fuel 




17 00 
13 60 
20 40 


" potatoes. 
" sugar. 
" coal. 
" wood. 


Clothing 


"2.0% 


68 00 


' ' printed calico. 

" standard sheeting. 

" 16 oz. cassimere. 

" 4 oz. merino or alpaca. 

" woollen hose. 

" of boots or shoes. 


Rent 


20% 


68 00 


" rooms in a good house. 



Having determined quantities in 1840 and compared with the 
quantities yielded now for the higher wages earned with the same 
or less labor, we have an absolute comparison of conditions. 

The customary comparisons by rate s of wages and prices only, 
fail to meet the case because of the varying proportions expended 
for meat, bread, sugar, etc., etc. These proportions once estab- 
lished, relative conditions will be easily determined. In prepar- 
ing this treatise I have been under the necessity of using approxi- 
mate estimates, because the historical and statistical basis for a 
true science of wages does not yet exist. The real problem is to 
determine what the absolute wages in food, fuel, shelter, and 
clothing now are in this country as compared to others, rather 
than to determine what the comparative rates of wages in terms 
of money may be. 

Is it true or not that the abundant product of this country 
yields a larger sum of money to be divided among its workmen 
than is possible in any other country ? 

Is it true or not that this sum of money represents a larger sup- 
ply of the necessaries of life for each dollar expended than in any 
other country ? 

If food is cheaper while clothing and shelter are dearer, what 
are the reasons ? 

If, with all our advantages of position, of virgin soil, and of 



THE RATE OE WAGES? 3^3 

freedom from vested wrongs, the laborer cannot earn more and 
get more for his money in this than in any other land, must we 
not admit partial failure, and ought we not to proceed at once to 
correct our methods ? 

Even since I had prepared these suggestions to statisticians, by 
the courtesy of Mr. Joseph D. Weeks, of Pittsburg, I have been 
supplied with the data by which I am enabled to make the follow- 
ing statement regarding the product of a blast furnace, which has 
been working in the production of pig-iron for the last twenty-five 
to thirty years. 

It is alleged that progress and poverty are correlative terms, and 
that as the rich grow richer, the poor grow poorer. This is a 
mere question of fact. Has it been true of iron ? There have 
undoubtedly been very profitable periods during the past thirty 
years, when the owners of ore beds and coal mines have secured 
large sums as rent or royalty from those who have worked them. 
There have also been periods of great profit in the conversion of 
ores and coal into iron, in which the rich have grown richer. We 
may not ask, nor expect to be informed, what these profits have been 
in specific cases ; but this we know — that the greater the profit, the 
more urgent the competition of capital with capital in opening 
new mines, constructing new furnaces, and producing greater 
quantities of metal. " Have the poor become poorer ? " The 
main question can be conclusively answered without the disclosure 
of a single fact of a private nature, and without any inquisition to 
which any and every capitalist or owner might not cheerfully sub- 
mit. Witness this statement in regard to iron. 

The two periods chosen for comparison are : ist. i860 to 1864, 
inclusive, five years of war, paper-money, inflation, and confusion. 
2d. 1875 to 1879, inclusive, the period of slow and steady recov- 
ery from a financial debauch, in which the solid and safe specie 
standard of value was restored. 

The furnace which gives the data used in this comparison is 
one for which all the materials have been purchased at current 
prices. The data, therefore, give the exact cost of the labor 



354 WHAT MAKES 

required to convert the coal and ore into iron after they have 
been delivered. 

The furnace is in the eastern part of the country, and is now at 
a relative disadvantage in procuring material, as compared to 
some of the establishments in other parts of the country, and its 
chances of continued success must depend upon the owners over- 
coming this advantage by skill and intelligence, and by the prompt 
adoption of easy improvement or labor-saving invention ; that is 
to say, by the sagacious and skilful use of capital. 

If we consider the period from i860 to 1880 historically, it has 
been one of singular progress in improvements for converting ores 
into iron, both in the construction of furnaces and in the saving 
of labor. To whom the benefits of these inventions and improve- 
ments have enured, the table shows ; but perhaps it may not be 
amiss to bring the principal changes into more conspicuous con- 
trast, and to compare these changes under the customary classifi- 
cations : 

I St. The margin between the selling price of iron and the cost 
of materials and labor has decreased 83 j^o" P^^ cent. The 
share of the capital has been reduced both absolutely and rela- 
tively. 

2d. The labor has been rendered less arduous, while the wages 
of the laborer have been increased 37 y^V P^r cent. The share of 
the laborer has been increased both absolutely and relatively. 

3d. The price of iron to the consumer has been reduced 31 -^-^ 
per cent. 

The measure in money of the gain to laborers is $133 each. 
For five years' work of seventy-one men, $9,433 per year, $47,215. 

The measure in money of the gain to consumers in five years, 
at $8.87 per ton, is $76,706. 



THE RATE OF WAGES? 



355 



THE LAW OF PROFITS DIMINISHED AND WAGES INCREASED BY COMPETITION, 
ILLUSTRATED BY THE STATISTICS OF AN IRON FURNACE USED FOR THE 
CONVERSION OF ORES AND COAL PURCHASED AT MARKET-PRICES, INTO 
PIG-IRON. PERIODS COMPARED — 1860 TO 1864 (fIVE YEARs), 1875 TO 
1879 (five years), DESIGNATED RESPECTIVELY I. AND II. 



•I,;-. 



I. Fixed capital 

a. Product of 

tons (II. 86,546 

3. Market value per j I. $27 95 
II. 19 08 
I. $1,627,268 
II. 1,651,2 

5. Cost materials and j I. $1,064,089 

labor III. 1,556,889 

6. Per cent, cost ma- j j_ 65.39 



The same in each period. 



In- De- 
crease, crease. 



[46; 



ton 

, Value total product ^ 



311^%^ 



94.28 




terials and labors 
to value product ' "^ 

7. Margin for taxes, 

insurance, cost of 
selling, incident- 
als, administra- 
tion, and profit, if 
any 

8. Sum of wages . A}' ^'34,-^'^ 

( 11. 172,491 

9. Hands employed . ■} yy' 

10. Wages per hand ( I. 

per year . . . I II. 

11. Wages per ton . A ' 

12. Per cent, of wages J I. 

to value . . . . 1 II. 

13. Ton product perj I. 

hand (II. 



44tV8 



76 

71 
$353 

486 
$2 27 

I 99 
8.25 
10.44 

776 
1,219 



83t'A 



61^ 



" SSto's 



This table might well be named " The indicator of progress 
from poverty of the workman and progress toward poverty of the 
capitalist." 

Another graphical method of showing these results is submitted, 
as follows : 



356 



WIIA T MAKES 



PIG IRON. 
Diagram showing the changes which have occurred in a blast furnace used for 
the conversion of iron ores and coal purchased at market-prices into pig-iron. 
The conditions of i860 to 1864 inclusive are taken as a standard, each being 
called 100, and all represented by the single point at the head of the column 
on the left ; from this point the lines of variation diverge, and the several 
points in the column on the right show the result of these variations in the 
averages of product, prices, wages, etc., in 1875 to 1879 inclusive. 

S years : 
1875 to iii79 inclusive. 

Product per hand increased 
from 776 tons to 1,219 tons. 

Total product increased from 
58,959 tons to 86,546 tons. 

Wages increased from $353 
jier year in a depreciating 
currency to $486 per year in 
an appreciating currency. 




Gross value of total product 
increased from $1,627,268 to 

$1,651,298. 

Number of hands employed 
decreased from 76 to 71. 



Price of iron decreased from 
$27.95 to $19.18 per ton. 



Margin between the value of 
the product and the cost 
of materials and labor, from 
which margin taxes, general 
expenses, and profits are to 
be derived, decreased from 
$9.55pert<?nto$i.o^perton. 



THE RATE OF WAGES? 35/ 

It will be apparent that while the profits of capital may have 
been much more than ten per cent, in the first period, and must 
have been much less, if any thing, in the second ; yet such facts 
can seldom be correctly ascertained, and if given, would not be as 
useful as to assume a certain uniform rate of profit. It is an 
absolute rule that if profits rise above a certain rate in any art 
which is open to free competition, capital will be immediately 
applied thereto in ample measure so as to bring them down to an 
average at any given time. If an excess of profit is gained for any 
considerable period, an excess of capital will be invested, and 
presently what is commonly called an over-production will occur. 

The iron industry has been peculiarly liable to excessive 
fluctuations, owing to the great fluctuations in the construction of 
railways, for which so large a part of the product of iron and steel 
is used. 

The attention of statisticians is called to the simplicity of this 
form. It is merely a digest of the customary annual statements 
which are made up by all well-conducted corporations or co- 
partnerships, and any competent accountant could fill up the 
blanks for any year or series of years. It will be observed that 
the facts given disclose the progress of the workmen, and the 
benefit of reduction of price to consumers ; but do not disclose 
the profits of the business in such a way as to be objectionable to 
owners of works or factories. The diminishing margin between 
the gross market value of the goods and the combined cost of 
materials and labor will yet sustain the rule that the profit of 
manufacturing, of metal work, of transportation, and in fact in all 
the arts of life, now consists in economy of administration and in 
saving small fractions in transportation, in the cost of selling, in 
insurance, taxes, and all the other expenses which of necessity 
intervene between the primary work of production and the final 
consumption of all products. 

In fact all profit now consists in saving what was once Wasted. 

It will be apparent to all statisticians that if we can establish 
the standard ration, the standard supply of clothing, and the 



358 WITA T MAKES 

standard price of shelter in the way previously suggested, and 
also secure tables similar to the analyses of cotton fabrics and of 
pig-iron, the actual progress of working people may be abso- 
lutely demonstrated. 

It is the purpose of the writer to attempt to procure such data 
in respect to boots and shoes, hats, paper, cordage, pine lumber, 
rolled iron, locomotive engines, and many other productions of 
which the accounts have probably been kept in a uniform way, 
and for this purpose he will be grateful for any aid which may be 
rendered. 

This is a difficult and uncertain task for an unofficial person to 
undertake, but even if imperfectly carried out it may yet establish 
a method which will ultimately lead to exact conclusions. 

Finally, in order that all such facts bearing upon the question 
" What makes the Rate of Wages ? " may be brought together for 
comparison and discussion, the writer invites communications, to 
be submitted at the meeting of the American Association for the 
Advancement of Science, in August, in the section devoted to 
political economy and statistics, of which he has the honor to be 
chairman. Communications from foreign countries will be grate- 
fully received. 

Any persons who are desirous to take part in the collection of 
such facts, or who will furnish the writer with the requisite data, 
may address him at No. 31 Milk Street, Boston, Mass., U. S. A. 

Edward Atkinson. 
Boston, March 30, 1885. 



THE RATE OF WAGES? 359 



FORM OF INTERROGATORIES, BY MEANS OF WHICH THE PRICE OF 

LABOR 1. E., THE RATE OF WAGES, AND THE COST OF LABOR 

1. E., THE SUM OF WAGES IN A GIVEN PRODUCT, MAY BE 

ASCERTAINED. 

1 . What was a fair valuation of your real estate and machinery 

at the earliest date from which you can make a consecutive 
statement of your business ? 

2. Beginning at this date, what was the annual product in units, 

such as pounds of cloth, tons of rails, pairs of boots, etc. ? 

3. For each year separately to 1884, inclusive. Or for periods of 

five years, wide apart ; say, 1856 to i860, 1866 to 1870, 1879 
to 1883— the year 1884 separately ? 

4. What was the market-price in each year of some specific unit 

which has been made of the same kind and same quality, or 
better, throughout the term ? 

5. What was the gross value of the total product each year or 

each period of five years ? 

6. What was the cost of materials and labor combined in each year 

or period, omitting insurance, taxes, and general expenses, 
and including as labor — overseers second hands, operators, 
mechanics, engineers, firemen, and laborers, but not including 
superintendent or clerk ? 

7. What was the sum paid for labor as above defined in each year 

or period ? 

8. What was the average number of laborers in each year or each 

period ? 
Consecutive statements from the earliest date to 1884, each year 
separately, preferred. 

Financial years may be given in place of calendar years. 



STANDARD COTTON SHEETINGS. 

The general tendency of wages toward a maximum and of profits to a minimum is 
shown by these diverging lines. There have been, of course, great fluctuations 
but it will be observed that even the reduction in the rate of wages in money, 
between 1883 and 18S5, was accompanied by an increase in the purchasing power 
of money, so that wages measured in sheetings are now higher than ever before. 
I believe this is also true if wages are measured in food or woollens. In other 
words, all who are employed at all can get more for their work than ever before 
in food, clothing, and shelter. 



1840 



1883 1^85 




208 per cent, increased effi- 
ciency of labor growing out 
of improvements in capital, 
— /. <?., machinery. 



1S6 per cent, increase of 
mactiinery. 



122 per cent, increased value 

of products. 
1 142 per cent, increase of 

wages measured in standard 

sheetings. 



9 per cent, increased w^ages, 
per hour, measured in 
money. 



S4y^ij increased wages meas- 
ured in money. 



9j per cent, increased num- 
ber of operatives required 
for 186 per cent, increase of 
machinery. 



17/0*5 decrease in hours per 

day. 
28 per cent, decrease in price 

of cloth. 



70 per cent, decrease in pro- 

Eortion of products secured 
y capital in yards. 
80 per cent, decrease in pro- 
portion of products assigned 
to profit at 10 per cent., 
1840 and 1883, and at 6 per 
cent, in 1885. 



INDEX. 



Agriculture in United States, 28, 320, 
321 

American Association for Advance- 
ment of Science, 358 

Annual products, 30, 331 

Appendices to " Rate of Wages " : 
I., 91; II., 118; III., 127 ; IV., 
129; v., 139; VI., 158; VII., 171 

Appendices to "Railroad, Farmer, and 
Public": I., 291 ; II., 298 

Arkwright, 79 

Armies of Europe, 73 

Austria, 16 

Bagehot, Walter, quotation from, 185 
Balance of trade, 201 
Banks and banking, 193 

" and manufactures, 217 

" State, 222 
Banking, elements of, .211 
Bastiat, Frederick, proposition from, 

23, 89 
Beef for prisoners, 163 
Beets, 47 

Bessemer, Sir Henry, 84 
Bi-metallic theory, 200 
Bismarck, 13, 16 
Blackburn, 343 
Blanchard, G. R., 240 
Boarding, cost of, 158, 163 
Bonanza farms, 76 
Brassey, 60 
Bread, 75, 167 



Bread, analysis of loaf of, 291 
Bremen steamer, incident of, 60 
Buckle, 67 

Bureau of Statistics, 350 
Burdens of Europe and America com- 
pared, 284 

Cairnes' theory of wages, 25 

Capital, 25, 188 

Carey, Henry C, theory of rent, 340 

Cash, 208 

Census of United States, 31, 96 

" Office Reports, 140 

" of Massachusetts, 92 
China and India, 69 
Cincinnati riots, 270 
Cities, growth of, 151 

" want in, America and Europe 

compared, 336 
Cities, tendency of poor to collect in, 

336 
Clothing of various classes, 165 
Coal, 78 

Coinage of silver dollars, 315 
Commercial crises, 314 
Competition, 35 

" in wages, 12 

Conclusions on wage question, 178, 

343 
Congress, present, 187 
Consuls, instructions to, 343 
Consumption defined, 199 

" in United State;, 31S 



361 



362 



INDEX. 



Cotton manufacture, 48, 50, 52, 68 

" workers, 42 
Corn meal, 161 
Cost of living, 338 

Crops, amount of land needed for, 335 
Cunningham, W., 189 

Dairy products, 156 

Dakota, 14 

Depression, present, 314 

Distribution, 9, 346 

Dodge, J. R., investigations and dia- 
grams of, 139, 143 

Dollars, standard of gold, 319 

Duties, 323 

Election, result of, 181 

Employes in manufactures, 109 
" on farms, iii, 320 

Employment, lack of, 313 

Engel, Dr., investigations of, 134, 166, 
169 

England, 16, 347 

English commerce, 82 
" wealth, 136 

Exchange, benefit of, 20, 55 
" result of, 37 

Factories, increase of, 313 
" cessation, 313 
" operatives, actual consump- 
tion of, 318 
Factory boarding-house in Massachu- 
setts, 163 
Factory boarding-house in Maryland, 

158 

Fallacies, popular, 26, 58, 62 

" counter propositions to, 63 

Fare, prisoners', 163 
" laborers', 164 

Farmers, dependent on foreign mar- 
ket, 305 



Fibres, amount transported on rail- 
roads, 309 

Flour of the West, 75 

Food and clothing, 317 

Food of workmen and prisoners com- 
pared, 169 

Form of questions, 359 

Formula of production, 48 

Frelinghuysen's report, 342 

Fuel, amount transported by railways 
per year, 309 

Fundamental law of labor, 94 

Germany, 16, 17, 343 
German army, 18 

" steamer, incident of, 61 
George, Henry, 9, 12, 331 
Giffen, Robert, 71, 83 
Glasgow, 343 
Gorernment, proposed regulation of 

railroads by, 305 
Grain, 22, 232, 235, 309 

" crops, table of, 233 
Great Britain, land question in, 227 

" and her manufactures, 

133 
Greenback fallacies, 26 

"Harmonies of Political Economy," 

23 
Hen industry, 155 
Homespun fabric, 125 
Hooper, W. E. & Sons, 158 
Howe Bakery, 291 
Howe, Samuel, 286 

Industry, diversified, 153 

Irish Land Acts, 13 

Iron, 77, 84, 156, 269, 318, 353, 356 

Iron and Steel Association, 240 



INDEX. 



363 



Kidder, Peabody, & Co., 211 

Laborers, 21, 44, 313, 315 

Land and labor, need of capital for, 

336 
Land under national ownership, 332 
Law of competition, 118 

" exchange, 197 
Legal-tender Acts, 197, 305 

" United States notes, 221 

Louisiana purchase, 203 

Machinery and agriculture, 99 

" effect of, in manufacture, 

35. 

Malthus, 15, 22, 339, 345 

Mauger & Avery, 240 

Mansfield, Judge, 4 

Manufactures, mechanics, and mining, 
306 

Memorial Hall, system of, 164 

Metals, amount transported on rail- 
ways, 309 

Metaphysics of exchange, 189 

Mexican dollars, 202 

Middle States, manufacture and com- 
merce of, 306 

Mid-Lothian, 343 

Miners, 329 

Minnesota, 15 

Money, 26 

" definition of, 28, 194, 220 
" false and true, 207, 211, 221, 
223 

Money, fiat, 4, 135, 194 
" paper, 227 

Montana, improvement of, 22 

National Bank, 205 

" " work of, 216 

" Legislature, 287 



National revenue, collection of, 305, 

320 
Necessities of life, exchange of, 312 
Newcastle, 343 

New England, manufactures of, 306 
Nimmo, Joseph, Jr., report of, 139, 

341 
North Carolina and New England, 68 
Nutritious food, 164 

Occupations, 104, 106, 305, 320 

" summary of, 149, 310 

Ohio, 147, 325 
Oldham, 343 
Oregon, 152 
Over-production, 55, 182 

Parsons, Judge, 4 

People of United States, expenditures, 

337 
Pepper, 202 
Persons engaged in production and 

distribution, 277 
Persons affected by foreign markets, 

322 
Phillips, Wendell, 12 
" Pillar" dollars, 202 
Political economy, French system of, 

23 
' ' Poor's Railway Manual, " 240, 341 
Population of globe, 22 

" United States, 26, 28, 

315 
President of United States, result of 

choice, 181 
Product, annual, in United States, 26, 

95. 353 
Product, division of, 70 
Production defined, g, 10 
Products, tables of, 156, 317, 327 
Professionals, 305 



364 



INDEX. 



Profits of capital, 357 
" Progress and Poverty," 9 
Progress in working iron, 354 
" of United States, 83 
Protection of domestic industry, 320 

Railroads, 27, 268 

" adjustment of value of 

stock, 263 
Railroads, capital, relation to farms 

and factories, 256 
Railroads, change wrought by, 231 
" charges, 292 

" " effect on cost of 

meat, 295 
Railroads, construction of, 43, 185, 

3^5- 
Railroads, diagrams, 274 

" Farmer, and Public, loi, 

175. 231 
Railroads, freight charges, 235, 252 
" local traffic, 252, 306 

" New York Central, 75 

" mileage, 240, 252, 257, 316 

" government regulations, 

294 
Railroads in Ohio, 148, 261 
Railroads unnecessary, 260 

" watered stock of, 239 
Railway Manual, Poor's, 237 
" lands, large sale of, 314 
" officials and laborers, 107, 313 
" panics, 1S5 

" " and commercial pa- 

ralysis, 254 
Railway rates higher with small traffic, 

309 
Railway service, extension of, 99, 305 

" system, 99 
Raw material, 323 
Reconstruction, 182 



Reign of terror, 16 

Religious dogma, 19 

Rent, formulas of, 340 

Reports of Railway Commissioners, 

341 
Resources of United States, 74 
Resumption Act, 226, 233 
Ricardian theory of rent, 340 
Rogers, J. E. Thorold, 189 
Russia and nihilism, 16 

Sabine, H., 240 
Science, advancement, 21 
Ship-building on the Delaware, 330 
Silver Act, 154, 305 

" compared with other products, 

318 
Silver dollars, uncertain standard of 

value, 316 
Slater, Samuel, 80 
Slavery, abolition of, 99 
Smith, Adam, 348 
Southern States, agriculture of, 306 
Speculation, 225 
Spinning-jenny, 84 
Standing army, 281 
Statisticians, suggestions to, 349 
State banks, 222 
Suez Canal, 19 
Sugar, 161 
Summary of wealth in United States, 

117 
Surplus revenue in United States, 57 
Tables : 

Average work and wages, 118-121, 
127 

Averages of wages, 129 

Consumption of food, 159, 160, 162, 
163, 165, 171, 172, 175, 350, 351 

Grain crops in United States, 233, 
296 



INDEX. 



365 



Law of profits, 355 

Occupations, 149-153, 305, 310 et 

seq., 325, 326, 328 
Only approximately accurate, 313 
Products, 157 
Products, value of, compared to 

manufactures, 140 
Railway charges, 293 

" construction, 274 

" employes, 277 
Railways, farms, and manufactures 

compared, 256 
Railroad mileage, 234, 241, 242, 

244-252 
Railway traffic, 148 
Railways, tons pioved by, 262 
Relative burdens of Europeans and 

Americans, 284 
Relative taxation, 154 

Tariff, 82, 325 

Taxes, 29, 33, 99, 180, 324 

" difference between, on raw ma- 
terial and finished products, 323, 

324 
Temple, Sir Richard, 74 
Theories of wages : Thornton, Cairnes, 

Walker, 24 
Timber, amount transported by rail, 

309 
Trade and transportation, 306 
Traffic, relation of volume to rate of 

charge, 307 

Unemployed, work for the, 279 



United States, land in, 332 

United States, area of, 334 

" resources of, 74, 334 

" Supreme Court of, 4 

Value of manufactured goods, 165 
Vanderbilt, Cornelius, 38 
Vegetable food, 161 
Vienna under martial law, 16 

Wages, rate of, 9, 341 
" subdivision of, 39 
" question, 62 
" word defined, 70 
" high rate of, in United States, 

74 
Wages, statistics, 130 
" theory of, 24 
Walker, E. H., 240, 341 

" Francis A., 24 
War, dangers of modern, 19 

" versus work, 72 
Wealth of United States, 31, 96 

" secret of, 136 
Weeks, Joseph D., 353 
Western States, grain in, 306 
Wheat, 14, 296 
Williams, consul at Rouen, report of, 

343 
Wool, 156, 266, 326 
Wright, Carroll D., 129, 166, 169, 341 

Yorkshire, 343 



